tailieunhanh - Lecture Macroeconomics: Lecture 27 - Prof. Dr.Qaisar Abbas

Lecture 27 Money supply and money demand - II. After studying this chapter you will be able to understand: ways the Fed can control the money supply, why the Fed can’t control it precisely, a portfolio theory, a transactions theory: the Baumol-Tobin model. | Review of the previous lecture Fractional reserve banking creates money because each dollar of reserves generates many dollars of demand deposits. 2. The money supply depends on the monetary base currency-deposit ratio reserve ratio 0 Lecture 27 Money Supply and Money Demand- II Instructor: Prof. Dr. Qaisar Abbas 1 This chapter sets up the IS-LM model, which chapter 11 then uses extensively to analyze the effects of policies and economic shocks. This chapter also introduces students to the Keynesian Cross and Liquidity Preference models, which underlie the IS curve and LM curve, respectively. If you would like to spend less time on this chapter, you might consider omitting the Keynesian Cross, instead using the loanable funds model from Chapter 3 to derive the IS curve. Advantage: students are already familiar with the loanable funds model, so skipping the KC means one less model to learn. Additionally, the KC model is not used anywhere else in this textbook. Once it’s used to derive | Review of the previous lecture Fractional reserve banking creates money because each dollar of reserves generates many dollars of demand deposits. 2. The money supply depends on the monetary base currency-deposit ratio reserve ratio 0 Lecture 27 Money Supply and Money Demand- II Instructor: Prof. Dr. Qaisar Abbas 1 This chapter sets up the IS-LM model, which chapter 11 then uses extensively to analyze the effects of policies and economic shocks. This chapter also introduces students to the Keynesian Cross and Liquidity Preference models, which underlie the IS curve and LM curve, respectively. If you would like to spend less time on this chapter, you might consider omitting the Keynesian Cross, instead using the loanable funds model from Chapter 3 to derive the IS curve. Advantage: students are already familiar with the loanable funds model, so skipping the KC means one less model to learn. Additionally, the KC model is not used anywhere else in this textbook. Once it’s used to derive IS, it disappears for good. However, there are some good reasons for NOT omitting the KC model: 1) Many principles textbooks (though not Mankiw’s) cover the KC model; students who learned the KC model in their principles class may benefit from seeing it here, as a bridge to new material (the IS curve). 2) The KC model has historical value. One could argue that somebody graduating from college with a degree in economics should be familiar with the KC model. Lecture Contents ways the Fed can control the money supply why the Fed can’t control it precisely a portfolio theory a transactions theory: the Baumol-Tobin model 2 Three instruments of monetary policy Open market operations Reserve requirements The discount rate 3 Open market operations definition: The purchase or sale of government bonds by the Federal Reserve. how it works: If Fed buys bonds from the public, it pays with new dollars, increasing B and therefore M. 4 Why it’s called “open market operations”: The “operations” are

• Kinh tế học
• Lecture Macroeconomics
• Principles of microeconomics
• Economic models
• Science of macroeconomics
• Tools of microeconomics
• Microeconomic transactions
• Money supply
• Money demand
• Bài giảng Kinh tế vĩ mô
• Kinh tế vĩ mô
• Data of macroeconomics
• Unemployment rate
• Inflation rate
• Natural rate of unemployment
• Consumer price index
• National income
• Agriculture sector
• Agricultural policies
• Economic fluctuations
• Macroeconomic policy
• Business cycle theory