ECO 205 Lecture Notes - Lecture 5: Ceteris Paribus, Expected Return, Economic Equilibrium
Document Summary
Preview: in this chapter, we examine how the overall level of nominal interest rates is determined. Determinants of asset demand: economic agents hold a variety of different assets. Summary table 1 response of the quantity of an asset demanded to changes in wealth, Change in qd: at lower prices (higher interest rates), ceteris paribus, the qd of bonds is higher: an inverse relationship, at lower prices (higher interest rates), ceteris paribus, the qs of bonds is lower: a positive relationship. Figure 2 shift in the demand curve for bonds. Figure 4 response to a change in expected inflation. Figure 5 expected inflation & interest rates (3-month treasury bills), 1953 2017. Figure 6 response to a business cycle expansion. Figure 7 business cycle & interest rates (3-month treasury bills), 1951 2017. Figure 9 response to a change in income or the price level. Figure 10 response to a change in the money supply.
