Economics 1022A/B Chapter Notes - Chapter 24: Credit Union, Price Level, Mortgage Loan

• School: Western University
• Department: Economics
• Course: Economics 1022A/B
• Professor: Jeannie A Gillmore

Document Summary

Chapter 24: money, the price level, and inflation. Liquid assets are some savings deposits that are not a means of payment. Lender of the last resort - it stands ready to make loans when the banking system as a whole is short of reserves. Financial innovations include: daily interest chequable deposits, automatic transfers between chequable and saving deposits, automatic teller machines, credit cards and debit cards. In the long run, the price level is determined by the quantity of money: p = m(v/y) (v/y) is independent of m, money growth rate + rate of velocity change = inflation rate + real gdp growth rate. Inflation rate = money growth rate + rate of velocity change - real gdp growth rate. In the long run, the rate of velocity change is not influenced by the money growth rate. In the long run, the rate of velocity change is approximately zero. Inflation rate = money growth rate - real gdp growth rate.