Money is a unit of account, and a medium of exhange
D = Real demand
L = nominal demand
2 markets out there,
Money you dont hold is
money market is in equilibrium when L = Ms/ P
real demand of money must be equal to real supply of
Ch. 13, national income accounting, balance of payments.
Macroeconommic analysis has 4 aspects of economic life
3. trade imbalances
4. money and the price level.
GNP- Gross national product.
all goods and services produced by a c
CURRENT ACCOUNT = CA
CA = Exports - Imports
Y - C - I - G = CA
Saving. S = Y - C - G.
S = I + CA
Savings = Investment + Current Account.
Private saving = Disposable income that is saved.
Private saving = Sp = Y - T - C.
T = Taxes, C = consumption.
Sg = Go
In economics, hyperinflation occurs when a country experiences very high
and usually accelerating rates of inflation, rapidly eroding the real value of
the local currency, and causing the population to minimize their holdings of
the local m
In economics, inflation is a sustained increase in the general price level of goods and
services in an economy over a period of time. When the general price level rises, each
unit of currency buys fewer goods and services. Consequently, infla
price level is dependent on
- aggredage money demand
Ms/P = L (i,Y)
P = Ms/(L(i,Y) )
long run impact of real gdp is ZERO
only thing fed can create is inflation.
a permanent increase of the money supply t
The Fisher effect states th
International investers want a diverse portfolio
S- I = Budget deficit + trade balance
Budget deficit = G + TR - TA
-price of one currency in terms of another
- what determines the price of a hot dog?
- the price of using someon
Factors affecting equilibrium exchange rate.
- Inflation Differences.
- purchasing power parity
Purchasing power parity- 2 big macs in different countries should cost the same in its
purchasing power parity
- adjustment can take place in ter
DB = SB.
Demand for bonds, supply of bonds.
Why hold money
- transaction motive
Lo = real demand for balances.
lower interest rate = lower cost of holding money
M1- currency + demand deposits
M2- M1 +
M3- M2 + jumbo cds