EC140 Lecture Notes - Lecture 16: Human Capital, Potential Output, Monetary Reform
10 views3 pages
meghan78 and 39778 others unlocked
21
EC140 Full Course Notes
Verified Note
21 documents
Document Summary
Interest rate: opportunity cost of holding money, when interest rates increase, people want to hold less money. Real gdp: if real gdp increases, the number of financial transactions increases, increasing gdp increases money demand. Price level: if the price level increases, more money is needed to keep real value of transactions, increasing the price level increases money demand. Graphed in terms of interest rates (price) and the quantity of money. Changes in supply/demand for money affect the interest rate. Change in interest rate affects consumption and investment. Doubling bank deposits, the value of cash, and prices would have no effect: monetary reform has tested this. Key to effective monetary policy is slow adjustment of prices. A change in interest rates, which causes: A change in aggregate expenditure and aggregate demand, which causes: An increase in real gdp, and an in ationary gap, which causes: An increase in wages and input prices, which causes:
Get access
Grade+
$40 USD/m
Billed monthly
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
10 Verified Answers
Class+
$30 USD/m
Billed monthly
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
7 Verified Answers