Demand value of other assets relative to bond

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Demand:  -    Value of other assets relative to bond -    Inflation favors borrower not the saver   Demand curve shift left Supply   Expected inflation favors borrower P bond  falls   interest rates rise Fischer Effect : there’s a relationship b/t expected inflation & interest rates - As inflation rises, interest rates rise Nominal interest rate = real rate + inflation expectation Theory of Asset Demand                            S bonds
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                           D bonds  Liquidity Preference Framework    Keynes defined money = currency + demand deposits People hold either money or bonds (only alternative) -   If income rises, demand for money shifts to right -   If income falls, demand for money shifts to left Policy : what happens if the Fed Reserve increases the money supply?
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Interest rates go down Monetary Policy  1. Liquidity Effect       Increase MS           i      decreases           interest rates rise & price inflation     2. Income Effect 3. Price Level Effect 4. Expected Price Level Effect
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