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the money market - Coggle Diagram
the money market
change in money demand
decrease of confidence in the electronic system: people want to keep more money in cash because they don't trust the banks
Kahneman 10 years ago someone of his family did not want to keep money online, she did not trust that
at any given intrest rate, the want of people to keep their money in cash increases compared to before
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changes in technology
when it suddenly becomes easier to change bonds into cash, say you can convert them at any instant then the demand for money will decrease since everyone wants this easily converted bonds
changes in price level cause change in demand for money. because as goods become more expensive and incomes are sticky meaning they have not yet had the chance to adjust then the demand for cash wil increase at any given intrest level
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Supply for money
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CHANGE IN MONEY SUPPLY
change in rules for required savings in banks, if the required reserves decrease then more money wil be lent out and therefor at any given intrest rate the money supply shall increase
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WHY IS THERE NO RELATIONSHIP BETWEEN MONEY SUPPLY AND NOMINAL INTREST RATES? because the central bank of a country controls the monetary base system: how much money is in the people's hands and how much money is in the vaults of the banks therefor, it controles the money supply. money supply is controlled by the central bank of a country and not by the intrest rates