econ3 9-2 - 2-13-08 Ch. 9 H igher the return (I.R., bond,...

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2-13-08 Ch. 9 - Higher the return (I.R., bond, etc) less willing we are to keep in our pocket o Demand money increase as I.R. decrease, we keep money I.R. vs. hold - Effect of increase in real GDP shift Money Demand to shift to right - Effect of decrease in real GDP or financial innovation (credit card, use of credit card, decrease money demand) shift Money Demand to left (during recession) - Measuring Money (currency) o The notes and coins held by individuals and businesses . o These are estimates o Bank’s money is called deposit not money!!! - Measuring Money (m1) (means of exchange) o M1 = currency + traveler’s check + checking deposits owned by individuals and businesses Liquid form of money Liquid form of money (easy to trade) Credit card (at the beginning) effect drop demand for money As GDP increase, money demand increase - Measuring money (m2) o M2 = m1 + time deposit + saving deposit + money market mutual fund (organization buy investment) Less liquidity
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econ3 9-2 - 2-13-08 Ch. 9 H igher the return (I.R., bond,...

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