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Y=A+BX P=A+BQ QS=QD They meet at an equilibrium point Ag as model explains everything Multiplier model is more direct.

More simple and allows u to work u with policies. Explain difference between induced and autonomos influenced by income Used to find equilibrium Demonstrates how level of income is graphically determined in the multiplier model

Liquidity difference in m1m2 M1 Currency cheking, trveller checks M2 Small denomination Time deposits Money market mutual DFfunds Savings deposits. Financial sector in macro (bonds and stuff)

Longterm is lonable funds market Reserve required reserve excess reserve

Money multiplier

Simple money multiplier 1/r where r is the reserve ratio. (10%= 0.1= 1/.10) Egs: deposit $1000 r=10% D*M where M is the multiplier = 1/r = 1000*1/.10= 1000*10 = 10000 When firms and individuals hold money Money multiplier I 1+c/r+c C is the ratio of money people hold on currency

When interest rates rise bonds and financial assets get attractive If it falls cost of holding money falls

Financial asset market bubble in early 200s The rr is %5 deposit 23e

Expansinory monitary policy shifts the d curve to the right coz it increases money spply nd int rate goes down increase in investment nd output. Contractinory monitory policy shifts it to the left.

Shorter aggregate supply(SAS) Sensitive to price ,

Not sensitive to prices

Monterey policy nd money market.

Yeald curve shows relationship between interest rates and bonds Quantitive easing Monetary regime `


Financial Institiouns