ECON 105 Chapter Notes - Chapter 14: Openmarket, Loanable Funds, Nominal Interest Rate

• School: Simon Fraser University
• Department: Economics
• Course: ECON 105
• Professor: David Cox

Document Summary

Chapter 14 - the money market and monetary policy. Since, in equilibrium, ms = md, the money supply equals billion. The price of the bond is ,000. c. If the money supply increases to ,200 billion, there will be a shortage of bonds, bond prices will rise, and the interest rate will fall until the quantity of money demanded once again equals the quantity supplied. This will happen when the interest rate falls to 2. 56% and the price of a bond rises to ,500. Chapter 26 the money market and monetary policy: the money demand curve will shift to the left; the fed should decrease the money supply in order to keep the interest rate unchanged. Initially, the economy is at point e in the top diagram. To raise the interest rate, the fed conducts an open-market sale of bonds. The money supply decreases to m2 s and the interest rate rises.