马克思货币概念.pptVIP

Money, Interest Rates, Exchange Rates Determination of exchange rates: How interest rates are determined; How expectations of future exchange rates are formed. Money? Distinguish money from other assets As a Medium of Exchange As a Unit of Account As a Store of Value Money Supply = the monetary aggregate the Federal Reserve calls M1. =the total amount of currency and checking deposits held by households and firms. Demand for money by individuals Amount of money an individual desire to hold Expected return (money and other assets) Riskiness of the asset’s expected return The asset’s liquidity Aggregate Money Demand → →Md The interest rate → → R The price level → → P Real national income → → Y For a given real income level, Y, real money demand rises as the interest rate falls. Money Supply Equilibrium in the money market: The money supply schedule is vertical at Ms/P because Ms is set by the central bank while P is taken as given. If there is an excess supply of money, then R↓ If there is an excess demand of money, then R↑ An increase in real output raises the interest rate, and vice versa, given the price level and money supply. Money supply exchange rate in the short run The previous assumption: price level (real output) given: In the short run: money supply↑→interest rate exchange rate In the long run: money supply ↑→price level exchange rate and other macroeconomic variables Linking money, interest rate, exchange rate P375 Simultaneous equilibrium in money market and the foreign exchange market. Conclusions An increase in a country’s money supply causes its currency to depreciate in the foreign exchange market A reduction in a country’s money supply causes its currency to appreciate in the foreign exchange market. Money, price level, exchange rate in the long run Monetary factors →price level in the long run. An economy’s long-run equilibrium is reached if prices were perfectly flexible and always adjusted immediately to preserve full employment. Tool: t