Unit 4 Flashcards
(18 cards)
Money Demand shifters
Change in:
Price Level
Income
Technology
Equation to calculate future value of money
$x*(1+ir)^N
Transaction Demand for Money
people hold onto money for everyday transactions
Asset Demand for Money
people hold onto money because it is less risky than other assets
MS is …
vertical
MD is …
downwards sloping
investment demand graph
x - quantity of investment
y - interest rate
investment demand slopes downward
shift in MS does what to investment demand
moves along the curve (DI)
MS shifters
Reserve requirement
Open Market Operations
Discount rates
money multiplier
1 / reserve requirement
finds money supply increase
discount rate
interest rate that the Fed charges commercial banks
increasing/buying:
reserve requirement
discount rate
govt securities
dec MS
dec MS
inc MS (BUY BIG)
Federal funds rate
interest rate that banks charge one another for one-day loans of reserves
market for loanable funds graph
x- Qloans
Y - real interest rate
if interest rates increase then bond prices…
decrease
if interest rates decrease then buyer would be ____ interested in buying
more
Demand for loans shifters
Changes in borrowing by consumers
Changes in borrowing by businesses (investment spending)
Changes in borrowing by the government (ex: deficit spending
Supply for loans shifters
Changes in private savings behavior
Changes in public savings
Changes in foreign investment (ex: more inflow of foreign financial capital)
