These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute. !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!Lecture!16!!Outline(of(Last(Lecture((I. Federal!Reserve!System!II. Federal!Reserve!System:!Four!Components!(Continued)!III. Investment!of!Monetary!Policy!IV. Open!Market!Operations!V. Required!Reserve!Ratio!VI. Reserves!Outline(of(Current(Lecture((I. Supply!of!Money!II. Money!Demand!Current(Lecture!1. Supply!of!Money(• The!entire!stock!of!currency!and!other!liquid!instruments!in!a!country’s!economy!as!of!a!particular!time.!!• The!Federal!Reserve!System!is!the!most!important!factor!in!Money!Supply.!• The!types!of!money!in!the!Money!Supply!are!classified!under!M1,!M2,!and!M3.!!• An!increase!in!Money!Supply!leads!to!a!decrease!in!interest!rates,!which!leads!to!more!investing!and!stimulating!consumer!spending.!!!!!!!!!!!!!!! ! !2.!Money!Demand!• For!Macroeconomics,!we!are!concerned!with!how!much!of!your!financial!assets!you!want!to!hold!in!the!form!of!money,!which!does!not!earn!interest,!versus!how!much!you!want!to!hold!in!interestMbearing!securities!such!as!bonds.!• The!quantity!of!money!balances!the!public!wants!to!hold/to!be!available.!!!((((((ECON(104(((11th(Edition(! !• Three!Basic!Motives!for!Holding!Money:!! Transactions:!To!buy!things!–!the!main!reason!people!hold!money.!! Precaution:!The!need!to!have!money!available!in!uncertain!events/expenses.!! Speculation:!Arises!in!situations!where!holding!money!is!perceived!to!be!less$risky!than!the!alternative!of!lending!the!money!or!investing!it!in!some!other!asset.!!!!!!!!!!!!!!!!!!! !3.!Demands!Together!!!!!!!! !(((!
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