Demand for Money Notes

The own rates of return on most types of money

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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 increases? If d...
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This document was uploaded on 03/28/2014 for the course ECON 244 at Georgetown.

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