知识产权维权和诉讼策略

1、Money, Output, and Prices,Classical vs. Keynesians,What is Money?,Is this money?,Is this money?,Is this money?,Is this money?,Is this money?,What is Money?,We normally think of currency when we think of money. However, more generally speaking, money is any commodity which satisfies the following: Un

2、it of account,What is Money?,We normally think of currency when we think of money. However, more generally speaking, money is any commodity which satisfies the following: Unit of account Store of Value,What is Money?,We normally think of currency when we think of money. However, more generally speak

3、ing, money is any commodity which satisfies the following: Unit of account Store of Value Medium exchange,Commodity money vs. Fiat Money,Commodity money vs. Fiat Money,In a commodity money system, the chosen “medium of exchange” has real, intrinsic value (gold, silver, etc.),Commodity money vs. Fiat

4、 Money,In a commodity money system, the chosen “medium of exchange” has real, intrinsic value (gold, silver, etc.),With a fiat money system , the chosen medium of exchange has no intrinsic value (paper currency),Commodity money vs. Fiat Money,In a commodity money system, the chosen “medium of exchan

5、ge” has real, intrinsic value (gold, silver, etc.),With a fiat money system , the chosen medium of exchange has no intrinsic value (paper currency) Fiat money is accepted because of faith!,Standard Definitions of Money,Standard Definitions of Money,Monetary Base (M0): Direct liabilities of the centr

6、al bank Currency in circulation + Bank Reserves,Standard Definitions of Money,Monetary Base (M0): Direct liabilities of the central bank Currency in circulation + Bank Reserves M1: Currency in circulation + Travelers Checks + Checking accounts,Standard Definitions of Money,Monetary Base (M0): Direct

7、 liabilities of the central bank Currency in circulation + Bank Reserves M1: Currency in circulation + Travelers Checks + Checking accounts M2: M1 + Savings accounts + Money Market Accounts + Small Time Deposits,Standard Definitions of Money,Monetary Base (M0): Direct liabilities of the central bank

8、 Currency in circulation + Bank Reserves M1: Currency in circulation + Travelers Checks + Checking accounts M2: M1 + Savings accounts + Money Market Accounts + Small Time Deposits M3: M2 + Large Time Deposits + Eurodollars,Money Supply in the US,Currency in Circulation: $690B Monetary Base: $732B M1

9、: $1.269T M2: $6.015T M3: $8.760T,Money Supply in the US,Money and Prices in the US,Real Personal Income,Real Personal Income & Monetary Base,Real Personal Income & M1,Real Personal Income & M2,Real Personal Income & M3,Money and the Business Cycle,Money is procyclical and leads the cycle,Money and

10、the Business Cycle,Money is procyclical and leads the cycle The money/income relationship is probably the most widely debated issues in macroeconomics,Money and the Business Cycle,Money is procyclical and leads the cycle The money/income relationship is probably the most widely debated issues in mac

11、roeconomics Keynesian economists argue that money causes output (ie, the Fed can stimulate the economy through monetary policy),Money and the Business Cycle,Money is procyclical and leads the cycle The money/income relationship is probably the most widely debated issues in macroeconomics Keynesian e

12、conomists argue that money causes output (ie, the Fed can stimulate the economy through monetary policy) Classical economists (supply side) argue that output causes money (i.e., the Fed responds to the economy rather than the economy responding to the Fed),Neoclassical Economics,Classical economists

13、 assume that all prices are free to adjust to any new information and markets clear,Neoclassical Economics,Classical economists assume that all prices are free to adjust to any new information and markets clear Therefore, output is completely determined by conditions in labor/capital markets (a.k.a,

14、 the real economy) independent of money supply (i.e., “money is neutral” ),Neoclassical Economics,Classical economists assume that all prices are free to adjust to any new information and markets clear Therefore, output is completely determined by conditions in labor/capital markets (a.k.a, the real

15、 economy) independent of money supply (i.e., “money is neutral” ) Given a fixed level of output, along with money demand, the supply of money determines the price level,Neoclassical Money Demand,It is assumed that households choose to hold a fraction of their nominal income in the form of cash (or a

16、 checking account),Neoclassical Money Demand,It is assumed that households choose to hold a fraction of their nominal income in the form of cash (or a checking account) Money Demand = k* PY,Neoclassical Money Demand,It is assumed that households choose to hold a fraction of their nominal income in t

17、he form of cash (or a checking account) Money Demand = k* PY For example, suppose that National Income is $8T. If the average household chooses to hold 10% of their income in the form of cash, what is aggregate money demand?,Neoclassical Money Demand,It is assumed that households choose to hold a fr

18、action of their nominal income in the form of cash (or a checking account) Money Demand = k* PY For example, suppose that National Income is $8T. If the average household chooses to hold 10% of their income in the form of cash, what is aggregate money demand? Money Demand = (.1)($8T) = $800B,Money M

19、arket Equilibrium,The aggregate price level will adjust so that money supply equal money demand,Money Market Equilibrium,The aggregate price level will adjust so that money supply equal money demand M = Money Demand = k*PY,Money Market Equilibrium,The aggregate price level will adjust so that money

20、supply equal money demand M = Money Demand = k*PY Solving the above expression for price gives us P = M/(kY),What affects k?,Interest rates: Cash is a non interest bearing asset. As interest rates rise, households hold less cash (k decreases),What affects k?,Interest rates: Cash is a non interest be

21、aring asset. As interest rates rise, households hold less cash (k decreases) Transaction costs: As the cost of acquiring cash rises, households hold more cash to economize on transaction costs.,Money Demand and the Quantity Theory of Money,An alternative way of expressing the previous expression is

22、MV = PY Where V is the velocity of money (V = 1/k) This is known as quantity theory of money,Velocity of M1: 1980 - 2003,Velocity of M2: 1980-2003,Velocity of M3: 1980-2003,What caused the change in money velocity?,Interest Rates,Fed Funds Rate: 1980-2003,What caused the change in money velocity?,In

23、terest Rates: During the 80s when interest rates were falling, consumers switched into checkable deposits. During the 90s as interest rates rose, consumers switched into interest bearing accounts,What caused the change in money velocity?,Interest Rates: During the 80s when interest rates were fallin

24、g, consumers switched into checkable deposits. During the 90s as interest rates rose, consumers switched into interest bearing accounts Financial innovation and deregulation significantly lowered the cost of holding less liquid assets,Implications of the Quantity Theory,Implications of the Quantity

25、Theory,In the long run, velocity is relatively constant. Therefore, a countrys inflation rate is equal to Inflation = Money Growth Output Growth In the short run, the price level is equal to P = M/(kY),Money and the Business Cycle,Recall that money is procyclical (and leads the cycle). How would neo

26、classical economics explain this fact?,Money and the Business Cycle,Recall that money is procyclical (and leads the cycle). How would neoclassical economics explain this fact? Given the formula P = M/(kY), if the money supply stays constant, prices would fall during an expansion.,Money and the Busin

27、ess Cycle,Recall that money is procyclical (and leads the cycle). How would neoclassical economics explain this fact? Given the formula P = M/(kY), if the money supply stays constant, prices would fall during an expansion. Therefore, to maintain a constant price level, the fed reacts to rising outpu

28、t by increasing the money supply (hence, rising output causes an increase in money!),Keynesian Economics,Keynesian economists begin with the same money demand (MV = PY), but that money can influence real output in the short run.,Keynesian Economics,Keynesian economists begin with the same money dema

29、nd (MV = PY), but that money can influence real output in the short run For example, suppose that the federal reserve increases the money supply by 10%. (Assume that V is constant),Keynesian Economics,Keynesian economists begin with the same money demand (MV = PY), but that money can influence real

30、output in the short run For example, suppose that the federal reserve increases the money supply by 10%. (Assume that V is constant) Classical: Output remains constant, prices rise by 10%.,Keynesian Economics,Keynesian economists begin with the same money demand (MV = PY), but that money can influen

31、ce real output in the short run For example, suppose that the federal reserve increases the money supply by 10%. (Assume that V is constant) Classical: Output remains constant, prices rise by 10%. Keynesian: Output rises , prices rise by less than 10% in the short run.,Keynesian Economics,Keynesian

32、economists begin with the same money demand (MV = PY), but that money can influence real output in the short run For example, suppose that the federal reserve increases the money supply by 10%. (Assume that V is constant) Classical: Output remains constant, prices rise by 10%. Keynesian: Output rise

33、s prices rise by less than 10% in the short run The key to Keynesian economics is that some prices are fixed in the short run. This allows the fed to affect relative prices (in particular, the real wage),“Sticky Wages”,Suppose that nominal wages are fixed in the short run,“Sticky Wages”,Suppose that

34、 nominal wages are fixed in the short run Most wage contracts are negotiated annually Minimum wage is adjusted infrequently Efficiency wages,“Sticky Wages”,Suppose that nominal wages are fixed in the short run Most wage contracts are negotiated annually Minimum wage is adjusted infrequently Efficien

35、cy wages If the fed increases the money supply, prices rise, but the nominal wage remains constant.,“Sticky Wages”,Suppose that nominal wages are fixed in the short run Most wage contracts are negotiated annually Minimum wage is adjusted infrequently Efficiency wages If the fed increases the money s

36、upply, prices rise, but the nominal wage remains constant. As the real wage (W/P) falls, labor becomes cheaper. Firms hire more labor this raises employment and output.,“Sticky Prices”,The classical model assume that producers respond to increases in money by instantly raising their prices. Suppose

37、that it is costly to raise prices (menu costs),“Sticky Prices”,The classical model assume that producers respond to increases in money by instantly raising their prices. Suppose that it is costly to raise prices (menu costs) Therefore, when the fed increases the money supply, producers respond to th

38、is increase in demand by increasing production rather than increasing prices. To hire more labor, they must bid up the price (W increases).,“Sticky Prices”,The classical model assume that producers respond to increases in money by instantly raising their prices. Suppose that it is costly to raise pr

39、ices (menu costs) Therefore, when the fed increases the money supply, producers respond to this increase in demand by increasing production rather than increasing prices. To hire more labor, they must bid up the price (W increases). As with the previous example, employment and output rise. However,

40、here the real wage (W/P) increases,Implications of Keynesian Economics,In the long run, prices are flexible and, therefore, money is neutral. However, in the short run, some prices are fixed. This allows the fed to affect real output.,Implications of Keynesian Economics,In the long run, prices are f

41、lexible and, therefore, money is neutral. However, in the short run, some prices are fixed. This allows the fed to affect real output. Note that there is a natural tradeoff between inflation and unemployment (the fed can lower unemployment in the short run by increasing the money supply, but ultimat

42、ely, prices will rise). This is known as the Phillips curve,The Phillips Curve,The Phillips Curve,Money and the Business Cycle,Keynesian economics takes the exact opposite stance on the money/output relationship. Increases in output are caused by increases in the money supply.,Money and the Business

43、 Cycle,Keynesian economics takes the exact opposite stance on the money/output relationship. Increases in output are caused by increases in the money supply. Which explanation is the correct one?,Money and the Business Cycle,Keynesian economics takes the exact opposite stance on the money/output relationship. Increases in output are caused by increases in the money supply. Which explanation is the correct one? Probably b