Lecture 16 - ECO100 - Introduction to Introduction...

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© Gustavo Indart Slide 1 ECO 100Y ECO 100Y Introduction to Introduction to Economics Economics Lecture 16: Lecture 16: The Demand for Money and The Demand for Money and Equilibrium in the Money Market Equilibrium in the Money Market
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© Gustavo Indart Slide 2 Assets Market: Money and Bonds Assets Market: Money and Bonds ± Assumption: only 2 assets, money and bonds ± Money doesn’t pay any return ± Bonds pay a return – the rate of interest ± The opportunity cost of holding money is the interest forgone by not holding bonds instead
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© Gustavo Indart Slide 3 The Demand for Money The Demand for Money ± Transaction motive ¾ Money as a medium of exchange ± Precautionary motive ¾ Money as a medium of exchange ± Speculative motive ¾ Money as a store of value
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© Gustavo Indart Slide 4 The Determinants of Money The Determinants of Money Demand Demand ± The demand for money is a function of the rate of interest , real GDP , and the price level ¾ M D = M D (i, Y, P) ± The interest rate
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This note was uploaded on 01/16/2011 for the course ECO ECO100 taught by Professor Inheart during the Fall '09 term at University of Toronto- Toronto.

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Lecture 16 - ECO100 - Introduction to Introduction...

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