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International Economics (Fach) / Money, Monetary policy and Inflation (Lektion)
- Task of the central bank regulates the quantity of money in the economy
- How does the money supply work? one bank leans money to the other bank -> total amount+reserves are the money supply (90 loans+10reserves => 190)
- what are the functions of money in an economy? medium of exchange unit of account store of value
- What are the instruments of controlling the money supply? open market operations changing refinancing rate adjusting (anpassen) reserve requirements
- Formel velocity of money V= (Price * Y-Quantity of Output)/ M-quantity of money
- Money theory Money*Velocity=Price*GDP
- Costs of Inflation (6) Shoeleather costs (minimziation of people's cash holdings) Menu costs (adjusting prices) Distort of prices (not the best use of goods) Inflation induced tax distortion (capital gains and interest rates are taxed more heavily) Loss of money value redistribution of wealth
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