ECO102H1 Study Guide - Liquidity Preference, Price Level, Interest Rate

78 views6 pages
31 Jul 2013
School
Department
Course
cudapuca and 38677 others unlocked
ECO102H1 Full Course Notes
45
ECO102H1 Full Course Notes
Verified Note
45 documents

Document Summary

Assets market: money does not pay any return, bonds pay a return. The yield of the bond is the rate of interest (i) in the economy. Present value (pv): value now of one or more payments or receipts made in the future; often referred to as discounted present value. The opportunity cost of holding money is the interest forgone (i) by not holding bonds instead. Expectations about returns on other assets (bonds) Interest rate (i): demand for money is negatively related to i. Real gdp (y): demand for money is positively related to the level of y. Price level (p): demand for money is positively related to p. we"ll assume however, p is fixed. The curve depicting the demand for money as a function of the rate of interest is called the liquidity preference curve. Assuming y and p are constant, the demand for money is a decreasing function of the rate of interest.

Get access

Grade+20% off
$8 USD/m$10 USD/m
Billed $96 USD annually
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
40 Verified Answers

Related textbook solutions

Related Documents

Related Questions