Академический Документы
Профессиональный Документы
Культура Документы
What is money
Money is the stock of assets that can
be readily used to make transactions.
Roughly speaking, the currency in
the hands of the public make up the
nations stock of money.
Measures of Money
C
M1
M2
M3
Currency
Currency plus demand deposits,
travelers checks and other
checkable deposits
M1 plus real money market mutual
fund balances, saving deposits and
small time deposits
M2 plus large time deposits, Eurodollars
and institution- only money market
mutual fund balances
QM = TD + FC
Broad money M2 includes all
liabilities of the banking system and
it is defined as:
Broad money= Narrow money +
Quasi money
M*V=P*Y
Where V=1/k.
This simple mathematics shows the link between
the demand for money and the velocity of money.
When people want to hold a lot of money for each
dollar of income (k is large), money changes
hands infrequently (V is small).
Conversely, when people want to hold only a little
money (k is small), money changes hand
frequently (V is large).
In other words, K and V are opposite sides of the
same coin.
% change in
Y
Consider each of these four terms.
First, percentage change in the Q/M is under the
control of CB.
Second, Percentage in V reflects shifts in money
demand; we have assumed that v is constant, so
the percentage change in V is zero.