MAF101 Lecture 10: Finance Notes - Week 10
15 Aug 2018
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Document Summary
Rewards for surplus units to defer consumption through saving. Costs for deficit units to use funds for consumption or investment. Basic interest rate in world of no inflation. Nominal: observed in market, real + inflation = nominal. Inflation refers to the annual percentage change in the price level of goods, usually measures by the cpi. Higher inflation implies greater required rate of return to compensate for loss in purchasing power. Monetary policy refers to management of liquidity conditions of the economy, which is the price and availability of funding for the economies expenditure. Maintenance of full employment between regarded as 5-6% unemployment. Economic growth and welfare of the people of australia. Defined as relationship between interest rate and quantity of money that people are willig to hold at any given interest rate. Interest rate is opportunity cost of holding money, higher ir on bonds or other interest- bearing assets raise opportunity cost of holding money and lower money demand.
