Chapter%2014%20PPT%20Student%20(2%20slides%20per%20page)[1]

Chapter%2014%20PPT%20Student%20(2%20slides%20per%20page)[1]...

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11/7/2010 1 Chapter 14:Part 1 Monetary Policy Recall that Monetary Policy is policy followed by the Fed using money supply and interest rates to pursue macroeconomic objectives. The goals of monetary policy: ± Price Stability ± High Employment ± Economic Growth ± Stability of financial markets and institutions
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11/7/2010 2 The Money Market The Fed uses two monetary policy targets in order to achieve its policy goals: ± Money Supply: The money supply in the economy is controlled by Money Supply : The money supply in the economy is controlled by ± Money Demand : A person’s wealth can be held as stocks and bonds (which earn a return), or as money (currency or checking account), which earns zero return. ± Cost of holding money? It’s the foregone return that you could’ve Cost of holding money? It s the foregone return that you could ve earned if you held bonds, as measured by ± Ceteris paribus, rising interest rates lead the public to demand Shifts in Money Supply (MS) If the Fed wants to shift the MS to the right, it engages in If the Fed wants to shift the MS to the left, it engages in Shifts in Money Demand (MD) What causes people to demand more money (shift MD to the right)?
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This note was uploaded on 11/15/2010 for the course ECON 203 taught by Professor Nelson during the Fall '08 term at Texas A&M.

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Chapter%2014%20PPT%20Student%20(2%20slides%20per%20page)[1]...

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