* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Download MONEY AND PRICE
Survey
Document related concepts
Economic bubble wikipedia , lookup
Nominal rigidity wikipedia , lookup
Exchange rate wikipedia , lookup
Monetary policy wikipedia , lookup
Virtual economy wikipedia , lookup
Interest rate wikipedia , lookup
Long Depression wikipedia , lookup
Fractional-reserve banking wikipedia , lookup
Quantitative easing wikipedia , lookup
Modern Monetary Theory wikipedia , lookup
Real bills doctrine wikipedia , lookup
Transcript
MONEY AND PRICE Money market Money - History division of labor barter „double coincidence of wants“ „universal equivalent“ = commodity money paper money time of golden standard The classical quantity theory of money M*V = P*Q MONETARY AGREGATES: M1 = TRANSACTIONS MONEY M2= BROAD MONEY M3 L = „liquid assets“ D = credit MONEY FUNCTIONS medium of exchange unit of account store of value Demand for Money The transaction demand The asset demand COST OF HOLDING MONEY – the interest loss because money is not invested in alternative assets Motives for holding money • Transaction • Precautionary • Speculative Factors affecting MD change in real output (GDP), change in price level, .. Other changes in economic conditions (transaction cost of converting near money into money, change in bond prices..) Interest rate An increase in demand for money i MD0 O Q0 MD1 Q1 M fig 2.2 Money market Money supply – little sensitive or completely insensitive to interest rate Determined by the central bank PRICE 1) Price as a result of what has to be expend on production of goods 2) Price as a reflection of utility rate of production 1. Assuming: average price level in economy is 1,5, real GDP 240 mld. EUR, money supply 60 mld. EUR. What’s the velocity of money like? 2. Assuming, the V is constant. What will happen in economy described in task nr.1 if the money supply increases by 20 mld. EUR? 3. Calculate the velocity of money, if the monetary base consists of paper currency 110,2 mld., demand deposits 321 mld., time deposits 504,8 mld and the value of final production is 1205,5 mld.