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Unformatted text preview: The own-rates of return on most types of money typically
- do not adjust when other interest rates change (ex: currency)
- Or, more commonly, adjust slowly (ex: savings deposits)
For simplicity, we will typically assume that money does not earn an explicit rate of return
Alternatively, we can assume that the own-rate of return on money doe snot change ! Money Supply
We assume in this section that The Fed fixes the quantity of money
- Contrary to fact and practice
- But we can reinterpret as Fed fixing the quantity of reserves ! Precautionary Demand for Money
What happens if, perhaps in response to increased economic uncertainty, the demand for money
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This document was uploaded on 03/28/2014 for the course ECON 244 at Georgetown.
- Fall '09