The constraints on monetary policy impact

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Reference no: EM13765602

Monetary Policy

1: Howe interest rates are set in the money market

2: How monetary policy affects macro outcomes

3: The constraints on monetary policy impact

4: The differences between Keynesian and monetarist monetary theories

Monetary policy: the use of money and credit controls to influence macroeconomic outcomes

Interest rate: the price paid for use of money

Money Supply (M1): currency held by the public, plus balances in transactions accounts

Money Supply (M2): M1 plus balances in most savings accounts and money market mutual funds

The forgone interest if the opportunity cost (price) of money people choose to hold.

Demand fort money: the quantities of money people are willing and able to hold at alternative interest rates, ceteris paribus

Portfolio decision: the choice of how(where) to hold idle funds

Transaction demand for money: money held for the purpose of making everyday market purchases

Precautionary demand for money: money held for unexpected market transactions or for emergencies

Speculative demand for money: money held for speculative purposes, for later financial opportunities

Equilibrium rate of interest: the interest rate at which the quantity of money demanded in a given time period equals the quantity of money supplied

Reference no: EM13765602

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