Chapter 12 : A Monetary Intertemporal Model
Neutrality of Money : A one time change in money supply that has no consequence for consumption,
investment, output, employment, interest rate, and economic welfare. It can have a proportional effect
on the change in price levels.
Money has 3 Functions :
1.) Medium of exchange
2.) Store of value
3.) Unit of account
How the Government Performs a One Time Money Supply Increase
1.) Helicopter Drop (Decrease taxes)
2.) Open Market Operation
3.) Seigniorage or Inflation Tax
What causes shifts in credit card service demand
1.) New information technology lowering the cost for consumers to access bank accounts
2.) A change in Government regulations
3.) A change in the perceived riskiness of Banks
4.) Changes in the hour to hour, day to day, week to week circumstances in the banking system
The Modern Era of Monetary Policy in Canada begins in the mid 1970s when the Bank of Canada
adopted Monetarist Policies (i.e. - inspirations by Milton Friedman, and others). The perspective is
this : The Central Bank should control Price Level and Inflation, and the best way to accomplish this is
to set a growth rate target in the money supply.
Neutrality of Money : A one time change in money supply that has no consequence for consumption,
investment, output, employment, interest rate, and economic welfare. It can have a proportional effect
on the change in price levels.
Money has 3 Functions :
1.) Medium of exchange
2.) Store of value
3.) Unit of account
How the Government Performs a One Time Money Supply Increase
1.) Helicopter Drop (Decrease taxes)
2.) Open Market Operation
3.) Seigniorage or Inflation Tax
What causes shifts in credit card service demand
1.) New information technology lowering the cost for consumers to access bank accounts
2.) A change in Government regulations
3.) A change in the perceived riskiness of Banks
4.) Changes in the hour to hour, day to day, week to week circumstances in the banking system
The Modern Era of Monetary Policy in Canada begins in the mid 1970s when the Bank of Canada
adopted Monetarist Policies (i.e. - inspirations by Milton Friedman, and others). The perspective is
this : The Central Bank should control Price Level and Inflation, and the best way to accomplish this is
to set a growth rate target in the money supply.
