The Md schedule in the right hand diagram shows how much money people wish to hold at each i for a given level of Y? Why would people wish to hold more money? {their liquidity preference changes?}. People/businesses borrow money not to hold it, but to exchange it for goods and services? 'New' money enters the economy by banks extending credit {loans}. "The demand for money (loans) is infinite with interest and payback obligations being the only governing factors." This is the opinion of Prof. R.A. Werner: He agrees that the demand for credit is "very large (perhaps infinite)". Werner, Richard (2005), 'New Paradigm in Macroeconomics', Basingstoke: Palgrave Macmillan P195. However: “We conclude that the likeliest assumption concerning the determination of the credit market is that it is supply-determined.” {Following Stiglitz and Weiss: Credit rationing in markets with imperfect information, American Economic Review, vol 71, no 3, pp. 393-410}. Werner, Richard (2005), 'New Paradigm in Macroeconomics', Basingstoke: Palgrave Macmillan P197. When new money enters the economy, i and Y adjust until people are 'happy' to hold the extra money?
The cleanest and most simple explanation I have seen. Thank you!
thanks a mill, i needed this explanation before my 2 o'clock exam today
How did it go?
Crystal clear
The Md schedule in the right hand diagram shows how much money people wish to hold at each i for a given level of Y?
Why would people wish to hold more money? {their liquidity preference changes?}. People/businesses borrow money not to hold it, but to exchange it for goods and services?
'New' money enters the economy by banks extending credit {loans}.
"The demand for money (loans) is infinite with interest and payback obligations being the only governing factors."
This is the opinion of Prof. R.A. Werner:
He agrees that the demand for credit is "very large (perhaps infinite)".
Werner, Richard (2005), 'New Paradigm in Macroeconomics', Basingstoke: Palgrave Macmillan P195.
However:
“We conclude that the likeliest assumption concerning the determination of the credit market is that it is supply-determined.” {Following Stiglitz and Weiss: Credit rationing in markets with imperfect information, American Economic Review, vol 71, no 3, pp. 393-410}.
Werner, Richard (2005), 'New Paradigm in Macroeconomics', Basingstoke: Palgrave Macmillan P197.
When new money enters the economy, i and Y adjust until people are 'happy' to hold the extra money?
Very helpful. Thank you
Thank you!
Thanks sir..
what about the endogenous money supply curve?
Is the same curve
Jose T. dinnae even remember posting this, (y)
So essentially these are two opposing view points? Can the Fed control the money supply?
Only partially and indirectly, through various interest rate mechanisms. The money is supply endogenous
Solid (Y)
IKDAM GAIRUPE PORAIDO DEY...SIR KONE