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Lecture

ECON102 Lecture Notes - Money Supply


Department
Economics
Course Code
ECON102
Professor
Angela Trimarchi

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Econ 102 Chapter 15 Notes Prof: Angela Trimarchi
Chapter 15
1Theory of Liquidity Preference
We now turn to an analysis of the short-run effects of changes in
the money supply on the interest rate
Diagram 1: Money Supply
Diagram 1: Money Supply
The money supply is determined by the Bank of Canada
The money supply is a vertical line
Interest Rate Money Supply
Quantity of Money
Quantity of
Money Fixed
by the Bank
of Canada

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Econ 102 Chapter 15 Notes Prof: Angela Trimarchi
Diagram 2: Money Demand Curve
Diagram 2: Money Demand Curve
The demand for money curve slopes down and to the right
An increase in the interest rate causes people to demand (and
hold) less money for transactions purposes
Diagram 3: An Increase in the Level of Transactions
Interest Rate
Money Demand
Quantity of Money
Money Demand
Interest Rate
Quantity of Money
r1
0
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