CO SCI 136 Lecture Notes - Lecture 26: Monetary Policy, Liquidity Preference, Federal Funds Rate
Document Summary
Money: pocket or checking account (not money on savings account or stock value, bonds etc. !) Only converted tangible money (easy access without effort) Opportunity cost for holding money (e. g. charging interest or investing in general (return): short-term interest rates mature within 6months or less, long-term interest rates mature a number of years within future. Relationship between quantity of money demanded & interest rate. Fall in money demand (giving money invested): shifts to left. Rise in money demand: shifts to right. Shifts of real money demand (general) curve due to changes in . Changes in aggregate price level (increases = rise in demand); inflation. Technology (improvements) (fall in demand (people are comfortable to have savings as transferring to cash is easy) If only e. g. interest rate changes = movement along the curve. If curve sharp instead of linear: straight line would penetrate both axes (negative amounts), thus: linear.
