contractionary monetary policy:
the monetary policy aimed at reducing the level or growth rate of the money supply (the opposite of an expansionary monetary policy)
demand for money function:
the desire to hold some form of money; usually represented as a function of income and a proxy for the opportunity cost of holding money
equilibrium interest rate:
the market-clearing interest rate
expansionary monetary policy:
a policy aimed at increasing the level or growth in the money supply
liquidity preference:
the desire to hold cash in preference to an alternative financial asset, such as a bond
loanable funds:
funds that are available to be borrowed for investment
monetary policy:
the policy enacted by a government or a central bank that affects the money supply, interest rates, and the exchange rate
nominal income:
income measured in current dollars
opportunity cost:
the cost of something measured as the value of the next best available alternative; the cost of forgone actions
precautionary motive:
the demand for money that results from the desire to prepare for unforeseen expenditures
real income:
income measured in constant dollars; incorporates the effect of a loss of purchasing power due to inflation
speculative motive:
the demand for money that results from the existence of the opportunity cost of holding money
transactions motive:
the demand for money brought about by its use as a means of buying and selling goods and services
