25Chp5-Econ3310 - Bond Market Equilibrium Interest Rates...

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Unformatted text preview: Bond Market Equilibrium Interest Rates Market for Money: LPF Equilibrium Interest Rates in LPF PRICE-LEVEL EFFECT a rise in the price level of goods and services causes the demand for money at each interest rate to increase and the demand curve to shift to the right INCOME EFFECT a higher level of income causes the demand for money at each interest rate to increase and the demand curve to shift to the right Keynes focuses on Precautionary Motive - Risk, Liquidity Speculation Motive - Wealth, Expected Return Transactions Motive - Wealth, Liquidity In Keynes’ terminology: People hold money because of Shifts in the Demand for Money Asset Demand ...
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This note was uploaded on 02/14/2012 for the course ECON 3310 taught by Professor Dix during the Fall '08 term at York University.

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