ECON 110 Chapter Notes - Chapter 28: Monetarism, Capital Outflow, Potential Output
wunch and 39345 others unlocked
30
ECON 110 Full Course Notes
Verified Note
30 documents
Document Summary
Chapter 28 money, interest rates, and economic activity. People hold their money in interest-earning assets (bond) and non-interest earning assets (money-mediums of exchange) -> simplification concept. Present value (pv): value now of one or more payments or receipts made in the future; referred to as discounted present value: depends on the interest rate. Pv = r1 (amount received one year from now) / 1 + i (interest: accounts for one year at stable interest rate. Pv = rt / (1 + i)t: where t = number of years, accounts for compounded interest over multiple years. Treasury bills: only one payment at some point in future. Present value of bond that promises a future payment or sequence of future payments is negatively related to the market interest rate (when i goes us, pv goes down) Pv of bond is the most someone would be willing to pay now to own the bond"s future payments.