ECON 203 Study Guide - Final Guide: Foreign Exchange Market, Invisible Hand, Price Level
2 Jun 2014
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ECON 203 Full Course Notes
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Money demand: the amount of money that people in an economy want to hold either in their pockets or in their banks (cid:224) measured by m1+ (money in circulation, deposits, checking accounts, credit unions, chartered banks) (cid:224) md =f (y, p l , i) where y=+, pl= + i= (money demanded is a function of income, price level (cpi) and interest) (cid:224)according to textbook, money supply is determined by the bank of canada (cid:224) 1/p l= value of money in terms of goods & services (cid:224)value of money in terms of goods and services goes down due to inflation (as price level rises, value of goods & services goes down) (cid:224) as price level (cpi) increases, quantity demanded of money actually increases b/c ppl hold more money in their banks to pay for things which r getting more expensive. Nco is a straight line because it""s a function of the interest rate but not the exchange rate.
