Chapter 5 All Materials PDF

Chapter 5 All Materials PDF - ECON 330: Money and Banking...

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ECON 330: Money and Banking Fall 2007 Section 1: Tuesday and Thursday, 11:30AM-12:45PM, SMU 104 Section 2: Tuesday and Thursday, 5:00PM-6:15PM, SRO B Prof. J. Santos South Dakota State University Student Learning Objectives: Chapter 5: The Behavior of Interest Rates [1] Identify four determinants of asset demand. [2] Describe how changes in the determinants of an asset&s demand a/ect the demand for the asset. [3] Explain why disequilibria (shortages and surpluses) in the bond market are short-lived. [4] Explain why the demand for and supply of bonds are, respectively, negatively and positively related to bond prices. [5] Evaluate how changes in wealth, savings, expected returns, risk, liquidity, expected pro±tability of investment opportunities, expected in²ation, and government de±cits a/ect the equilibrium price of bonds. [6] Identify the Fisher E/ect. [7] Assess how the equilibrium price and quantity of bonds will likely behave during a business cycle expansion (note, the demand and supply model may not be able to determine the e/ect on both price and quantity). [8] Distinguish between real and nominal interest rates.
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Department of Economics South Dakota State University Chapter 5: The Behavior of Interest Rates Econ 330: Money and Banking Fall 2007 Prof. Joseph Santos This outline draws from Frederic Mishkin’s Money, Banking and Financial Markets (2007) and, as such, contains copy written material. Please do not quote without proper citation.
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Department of Economics South Dakota State University [1] Introduction In this chapter, we examine how the overall level of nominal interest rates is determined and what factors influence this level. We learned in Chapter 4 that interest rates are inversely related to bond prices, so if we can explain why bond prices change, we can also explain why interest rates change. Because interest rates on different securities tend to move together, in this chapter we will proceed as if there were only one type of bond and, hence, a single interest rate in the entire economy.
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This note was uploaded on 04/09/2008 for the course ECON 330 taught by Professor Santos during the Spring '08 term at SD State.

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Chapter 5 All Materials PDF - ECON 330: Money and Banking...

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