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Unformatted text preview: • Keynesian "liquidity" trap • Keynesian Monetary transmission linkages • See Figure 13.3 on page 277 in the textbook • Md = Demand for Money • Ms = Supply for Money • To increase interest rate -- move money supply to left • Investment Demand and Injections • % Return on Investment • Federal Funds Rate -- what one bank pays another bank to borrow reserves • Federal Funds Market • Tight Money -- decrease money supply, raise interest rate, reduce investment, reduce GDP...
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- Spring '99
- Monetary Policy, Federal Reserve System, Federal Reserve Board of Governors, GDP Monetary Policy