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Lecture

Econ_Po_Point_Notes

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Department
Economics
Course
ECO 304L
Professor
All Professors
Semester
Winter

Description
Econ Po Point Notes April 2 1. Functions of money a. Medium of Exhange b. Unit of Account c. Store of value 2. What is money a. Currency yes b. Diamonds no c. Fish no 3. Intrinsic value- value conferred by the objects alternative uses 4. Commodity money- object with intrinsic value that is used as money 5. Fiat money- money with no intrinsic value 6. Components of money supply a. M0- fcus only on gov issued components(Monetary Base) i. Deposits of banks at the fed ii. Vault cash iii. Currency incirculation b. M1 i. Currency in Circulation ii. Travelers’s checks iii. Demand deposits iv. Other checkable deposits c. M2 i. M1 + ii. Savings iii. Small denomination time deposits iv. Other not as liquid things d. M1 and M2- Broad Money supply 7. Inside money- liabilities of the bank that are means of payment 8. Outside money- liabilities of the government that serve as a means of payment April 4 1. Money Multiplier a. Money supply/ Monetary Base b. Currency + Deposits / Currency + reserves April 11 2. What matters for price level is how much mone there is in circulation compared to the amount of goods that people want toe xchae a. QUANTITY Theory 3. Price level- P – cost of average good interms of dollas 4. 1/P- Value of money: cost of a dollar in terms of average good… what 1 buck can buy youy 5. Money Demand a. Money demanded / Price Level = Constant * Y\ 6. Fisher Effect- In the long run the nominal interest rate rises by the same number of percentage points as the inflation rate 7. Change in Ln variable is growth rate Lna-Lnb April 16 1. Graphing Money damand a. 1/P on Y b. Money demanded on X c. As Price level goes up money demanded goes up d. OR e. Money Demanded over Price level on X f. Interest Rate on Y i. As interest rate goes up, money demanded goes down 2. Money Growth and Inflation a. Real GDP is determined by Captil, labor force, technology NOT money supply b. If Real GDP is constant then inflation rate is equal to the growth rate of the money suppliy c. If Real gdp is growing than inflation is negative unless the money supply is growing faster April 18 1. Exchange Rate Essentials a. Exchange rate- number of US dollars required to buy one Euro or any other currency b. Dollars per Apple is nominal price of an apple c. Dollars per Euro is nominal price of a euro d. A drop in the value of a dollar – more dollars
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