ECON 3K03 Lecture Notes - Lecture 5: International Alphabet Of Sanskrit Transliteration, Business Cycle, Opportunity Cost

• School: McMaster University
• Department: Economics
• Course: ECON 3K03
• Professor: Helene Wagner

Document Summary

The economics of money, banking, and financial markets. Response of the quantity of an asset demanded to. Changes in wealth, expected returns, risk, and liquidity. Supply and demand in the bond market: bond demand. At lower prices (higher interest rates), ceteris paribus, the quantity demanded of bonds is higher. At lower prices (higher interest rates), ceteris paribus, the quantity supplied of bonds is lower. Shifts in the demand for bonds: wealth. In an expansion with growing wealth, the demand curve for bonds shifts to the right: expected returns. Higher expected interest rates in the future lower the expected return for long-term bonds, shifting the demand curve to the left. Shifts in the demand for bonds (cont"d: expected inflation. An increase in the expected rate of inflations lowers the expected return for bonds, causing the demand curve to shift to the left: risk. An increase in the riskiness of bonds causes the demand curve to shift to the left: liquidity.