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Chapter 15 (4)
Money, Interest Rates, and Exchange Rates
◼ Chapter Organization
Money Defined: A Brief Review
Money as a Medium of Exchange
Money as a Unit of Account
Money as a Store of Value
What Is Money?
How the Money Supply Is Determined
The Demand for Money by Individuals
Expected Return
Risk
Liquidity
Aggregate Money Demand
The Equilibrium Interest Rate: The Interaction of Money Supply and Demand
Equilibrium in the Money Market
Interest Rates and the Money Supply
Output and the Interest Rate
The Money Supply and the Exchange Rate in the Short Run
Linking Money, the Interest Rate, and the Exchange Rate
U.S. Money Supply and the Dollar/Euro Exchange Rate
Europe’s Money Supply and the Dollar/Euro Exchange Rate
Money, the Price Level, and the Exchange Rate in the Long Run
Money and Money Prices
The Long-Run Effects of Money Supply Changes
Empirical Evidence on Money Supplies and Price Levels
Money and the Exchange Rate in the Long Run
© 2015 Pearson Education, Inc.
8. The chart below gives inflation rates since 1980 for New Zealand, Chile, Canada, and Israel:
9. If an increase in the money supply induces an increase in real output in the short run, then the short-run
decrease in the real interest rate will not be as pronounced as it was without the increase in real output.
© 2015 Pearson Education, Inc.
10. As the interest rate falls, people prefer to hold more cash and fewer financial assets. If interest rates
11. One clear complication that a zero interest rate introduces is that the central bank is “out of ammunition.”
