Money+Demand-Supply+-+F11

Money+Demand-Supply+-+F11 - Money Demand and Money Supply...

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Money Demand Money Demand and Money Supply Money Supply
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Question Question How much money do you How much money do you demand? demand? Nick Noble - Money Demand and Money Supply Review: Review: Functions of Money Eco 301 - Fall 2011 2
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Bond Demand/ Money Demand Bond Demand/ Money Demand Define Define Total Financial Wealth TFW TFW = Money + Bonds Bond Demand i ↑ B d Nick Noble - Money Demand and Money Supply i TFW = M TFW = M s + B + B s TFW* TFW* B d B d M d M d Review Review Bond Demand Eco 301 - Fall 2011 3
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Money Demand- Money Supply Money Demand- Money Supply Bond Demand – Bond Supply Bond Demand – Bond Supply What is: What is: TFW TFW = M s + B s Allocation Allocation TFW TFW = M d + B d Nick Noble - Money Demand and Money Supply Eco 301 - Fall 2011 4
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Excess Demand/Supply TFW = M s + B s TFW = M d + B d 0 = M s + B s – (M d + B d ) 0 = (M s - M d )+ (B s – B d ) ESM + ESB = 0 ESM + ESB = 0 ESM = Excess supply of money (M s - M d ) ESB = Excess supply of bonds (B s – B d ) Nick Noble - Money Demand and Money
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Money+Demand-Supply+-+F11 - Money Demand and Money Supply...

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