W2P1 - NotebookLM Flashcards
What are the main types of money?
Commodity money (intrinsic value), convertible paper money (exchangeable for gold), and fiat money (value by government acceptance). Deposits and debt contracts can also act as money.
What are monetary aggregates?
Measures like M0, M1, M2, and M4 that include different assets with varying liquidity. M0 is the most liquid; M4 (in the UK) is the least.
What is the velocity of money?
The rate at which money circulates in the economy, equal to nominal output divided by the money stock.
Explain the quantity theory of money.
Money supply times velocity equals nominal output.
How does the Keynesian view differ from the monetary view of money demand?
Keynesian view: money demand depends on income, interest rates, and transaction costs, while the monetary view sees money demand as proportional to income.
How do you calculate the growth rate of a product (X * Y)?
The growth rate of X plus the growth rate of Y.
How is the change in the real money supply expressed?
µ - π, where µ is the change in the money supply and π is inflation.
How do income and interest rates affect money demand?
Money demand is positively related to income (more transactions) and negatively related to interest rates (opportunity cost of holding money instead of bonds).
How is money supply represented in the money market model?
A vertical line, indicating it is controlled by the central bank and is inelastic (does not depend on the interest rate).
What defines equilibrium in the money market?
The point where money supply equals money demand.
What shifts the money demand curve?
Changes in output (income) or transaction costs. An increase in output shifts the money demand curve to the right. A decrease in transaction costs shifts the money demand curve to the left.
What happens when there is excess money supply?
Excess money supply in the money market implies excess money demand in the bond market, leading to increased bond prices and decreased interest rates.
