ECO100Y5 Lecture Notes - Lecture 35: Nominal Interest Rate, Monetary Policy, Deflation
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ECO100Y5 Full Course Notes
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Monetary policy - the actions the bank of canada takes to manage the money supply and interest rates to pursue macroeconomic policy goals. Their goals are to ensure price stability, high employment, stability of financial markets and financial institutions, and economic growth. Open market buy back operations buying and selling of. Money demand: i = nominal interest rate = o/c of holding money. Change in i = movement along the md curve. Bank of canada can cause money supply to increase or decrease through bank of canada tools. Change in ms affects i and qm. Loanable funds relationship between loanable funds and the long- term real interest rate. Money market relationship between quantity of money and the short- term nominal interest rate. They frequently move in the same direction so we will assume they always do. Expansion monetary policy used in recession when yd > y. Decreases interest rates to increase ad and increase rgdp by buying.
