Class Notes (836,414)
United States (324,504)
Economics (520)
CAS EC 102 (215)
Lecture 9

PM Lecture 9 Money II

3 Pages
Unlock Document

CAS EC 102
Jay Zagorsky

PM Lecture #9: Money II Thursday, April 10, 2014 10:01 PM Lecture Overview - Measuring Money - Why Do People Hold Money? - Where is the Money? - Famous Economist:F. A. Hayek - Infamous Person: Huntington Hartford - If Time Ted Movie Why is Measuring Important? - Chapter 16 discusses what causes inflation/deflation;key point is amount of money influences inflation/deflation ○ Measuring amount of money helps us predict and control inflation/deflation - Spending is based on amount of money individuals and businesses have Measuring Money - There are different types of money based on liquidity ○ Liquidity is the ease with which an asset can be convertedinto cash, without losing value, and spent - Gov't tracks three measures ○ M1: Most liquid  Consists of: □ Currency (paper bills and coins) 49% □ Demand deposits (checking accounts) 51% □ Travelers checks $4 billion  Total value: □ $2.7 trillion in Feb 2014 □ $2.5 trillion in Feb 2013  8% growth ○ M2: Moderatelyliquid  Consists of the M1 category + □ Money marketfunds □ Saving deposits □ Small CD's (less than $100,000)  Total value: □ $11.1 trillion in Feb 2014  7% growth ○ M3: Least liquid (no longer used in US)  Consists of the M2 category + □ Large CD's (more than $100,000) □ Reverse purchase agreements □ Eurodollars  Total value (US) □ $10.3 trillion in Feb 2006 □ From Feb 2005 to Feb 2006,grew 8.4% □ Series ended in Feb 2006,but still used in Germany and EU ○ World Bank Information  World Bank provides fata of Stock of Money and Stock of Quasi-Money in WDI. What are these? □ Stock of Money is M1  Currency and demand deposits/checkingaccounts □ Stock of Quasi-Money is M2 minus M1 Savings and time deposits held in a country's bank  Savings and time deposits held in a country's bank ○ CIA  CIA Factbookprovide data on narrow money and broad money. What are these? □ Narrow money is M1  Currency and demand deposits/checkingaccounts □ Broad money is M3  All various forms of cash and deposits held in a country's banks Why Do People Hold Money? - Problem:Money pays no interest. Could be holding a bond instead of money and earning interest ○ Transactions motive  You cannot spend bonds, CDs and stocks and credit cards are not accepted everywhere ○ Speculative motive  Sometimesholding cash is profitable □ Key idea: Bond prices are inverselyrelated to interest rates  If interest rates rise, bonds will worth less ○ Precautionarymotive  Sometimes,having cash available to pay for emergenciesis very helpful Where is the Money? - The Boston Fed does a survey of consumer payment choice ○ $69 cash on each person (transaction movie) ○ $229 cash at home/stored(precautionary motive) ○ Similar numbers in Australia and Canada, but people in Germany and Austria hold about 2 times as much cash - Where is all the currency? ○ In Feb 2014,there was $1.1 trillion of US currency outstanding ○ There are about 310 million people living in the US  1.1
More Less

Related notes for CAS EC 102

Log In


Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.