HIS109Y1 Lecture Notes - Lecture 16: Demand Shock, Shortage, Opportunity Cost
Document Summary
If i have marker pens that i have made, and i want oranges; if there is no money i have to find someone who is willing to sell oranges and who want marker pens. Interest rate: price of holding money; what you give up by not holding bonds. Determined by demand and supply in both money and loanable funds markets: law of demand for money, as the price of money the interest rate rises, the quantity demanded of money decreases, fig. 9. 1: whenever we draw a demand curve, we make assumptions, changes in real gdp, correlated with income. Or average prices cause change in demand for money (shift of demand curve). Increase in demand for money (rightward shift) from: Increase in real gdp: rise in prices, decrease in demand for money (leftward shift) from, decrease in real gdp, fall in prices. Debased the value): convertible paper money paper money converted into gold on demand, fiat money.
