Vecka 2 sammanfattningar del 5 Flashcards
What is aggregate money demand?
It is not a demand for a certain number of currency units but is instead a demand for a certain amount of purchasing power.
What does Aggregate real money demand depends negatively and positively on?
Negatively: on the opportunity cost of holding money
positively: on the volume of transactions in the economy
When is The money market in equilibrium?
when the real money supply equals aggregate real money demand.
What does changes in the money supply do when the price level and real output is given?
a rise: lowers the interest rate
a fall: raises the interest rate.
What does changes in real output do with the interest rate at a given price level?
A rise in real output raises the interest rate, while a fall in real output has the opposite effect.
What happens if there is a fall in the domestic money supply?
It causes the domestic currency to appreciate against foreign currencies.
What happens if you lower the domestic interest rate?
There is an increase in the money supply which causes the domestic currency to depreciate in the foreign exchange market
When does The assumption that the price level is given work?
In the short run in countries with moderate inflation.
What does Exchange rate overshooting do?
It heightens the volatility of exchange rates, which is a direct result of sluggish shortrun price level adjustment and the interest parity condition.
