Money Supply Instruments of monetary policy 1 Open-market operation ② Reserve requirement ③ Discount rate
Money Supply Instruments of monetary policy ① Open-market operation ② Reserve requirement ③ Discount rate
Money Demand Portfolio theories of money demand the role as a store of value offers a different combination of risk and return than other assets(safe/normal return) The D for M depends on the risk and return offered by M and by the various assets households can hold instead of m
Money Demand Portfolio theories of money demand --- the role as a store of value --- offers a different combination of risk and return than other assets (safe/normal return) The D for M depends on the risk and return offered by M and by the various assets households can hold instead of M
Money Demand Example: (M/P)=L(rs, rh, ze,w) Are portfolio theories useful for studying money D? Depends Narrow measures of M Broad measure of M---plausible M is a dominated asset (as a store of value, it exists alongside other assets that are always better
Money Demand Example: Are portfolio theories useful for studying money D? Depends… Narrow measures of M --- Broad measure of M --- plausible M is a dominated asset (as a store of value, it exists alongside other assets that are always better) (M / P) L(r ,r , ,W ) e s b d =