ECON102 Study Guide - Final Guide: Nominal Interest Rate, Real Interest Rate, Irving Fisher

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ECON102 Full Course Notes
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ECON102 Full Course Notes
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1/p is the value of money measured in terms of goods and services, if p is price ! Money supply, money demand, and money equilibrium ! supply and demand for money determines the value of money ! supply of money/ money supply: ! Increased overnight rate, decreased quantity of reserves, decreased money supply ! Decreased overnight rate, increased quantity of reserves, increased money supply ! Bofc sells bonds in open market, decreases money supply ! Bofc buys bonds in open market, increased money supply ! money demand - demand for money re ects how much wealth people want to hold in liquid form ! Also called liquidity preference , quantity demanded depends on interest rate that a person can earn by buying an interest bearing bond rather than in a wallet or checking account ! How much money someone decides to hold depends on the prices of goods and services !

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