Class Notes - 11-12-07

Class Notes - 11-12-07 - Macroeconomics Class Notes...

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Macroeconomics – Class Notes – 11/12/07 Milton Freeman Robert Solow and Paul Samuelson (followers of Keynes) Fed’s Policy Tools to Increase Money Supply ( SUPER IMPORTANT FOR NEXT EXAM!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!) Fed Buys Government securities (Open Market Operations) Fed lowers reserve ratio Fed lowers Discount Rate - Note these work in reverse Theory of Liquidity Preference: The Supply and Demand for Money Money Supply (MS): Fed Commercial Banks Consumers’ willingness to deposit funds in bank Keynes’ Theory of Liquidity Preference: People hold wealth in 2 Financial assets: Money : Convenient as means of exchange, but pays no interest Bonds : Not easy to spend, but pay interest (not as liquid, but pay interest) Money supply (MS) Money demand (MD)
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Theory of Liquidity Preference: The Supply and Demand for Money Money Demand (MD) The lower the interest rate, the greater the quantity of money demanded
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This note was uploaded on 04/15/2008 for the course ECON 101 taught by Professor Golden during the Fall '07 term at Allegheny.

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Class Notes - 11-12-07 - Macroeconomics Class Notes...

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