Topic 7: Money, Interest and Inflation

Macroeconomics (SHAD 1053)

by LIM HUI YING

After finish this topic, we can know

* The Real Economy

-Real factors that are independent of the price level determine potential GDP and the natural unemployment rate.

-Investment demand and saving supply determine the amount of investment, the real interest rate and, along with population growth, human capital growth, and technological change, determine the growth rate of real GDP.

* The Money Economy

-Money—the means of payment—consists of currency and bank deposits.

-Banks create money and the Fed influences the quantity of money through its open market operations, which determines the monetary base and the federal funds rate.

Topic 7: Money, Interest and Inflation

Posted on 27 April 2018, 11:31 AM

After learning this topic, we can learn what determines the demand for money and how the demand for money and the supply of money determine the nominal interest rate. Besides we can also explain how in the long run, the quantity of money determines the price level and money growth brings inflation.

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