Lernmaterialien für The Financial Market an der Hamburg School of Business Administration

Pay a positive interest rate, but cannot be used for transactions (governmental and corporate bonds)

• your level of transactions 
• the interest rate on bonds 

value of all your financial assets minus all your financial liabilities and it is a stock variable

An increase in interest rate decreases the demand for money, as people put more welath into bonds.

If nominal income doubles, the demand for money also doubles.

Money supply = Money demand

Money supply is vertical because it is undependent from the interest rate and is usually a fixed quantity set by the central bank.

1. Revenue requirements
2. Discount 
3. Open Market Operations

Money demand is downward sloping, since a high interest rate leads to low quantities demanded and a low interest rate leads to a higher quantity demanded.

1. Increase in price level
2. Increase in income
3. Changes in technology (credit card)

• Used for transactions, but it pays no interest
• Two types of money: currency (created by central banks) and deposit accounts (created by commercial banks)
  • criteria that money is considered money: Medium of exchange, Unit of account, Stable store of value