1 How Money Matters: An Illustration Interest Rates, Money Supply, and Credit Flows Change Federal Reserve Acts Aggregate Demand for Goods and Services Shifts Economy’s Output and Prices Respond

2  How Credit Matters How Credit Matters  Money, Credit and the Economy Money, Credit and the Economy  Are Money and Credit All That Matter? Are Money and Credit All That Matter?  Money and Credit Flows: first fiddle or second fiddle Money and Credit Flows: first fiddle or second fiddle

3 How Credit Matters  In an economy where a large percentage of lending flows from commercial banks and other depository institutions, changes in the supply of money will be closely related to changes in the supply of credit  this was typical of the U.S. economy until the late 1970s and early 1980s  信用：在一定时期内，货币从贷方直接或是通过 金融中介流向借方。

4 How Credit Matters  Since the early 1990s, changes in money and credit flows have not been as closely related  Credit flows come from other sources  changes in credit extension by depository institutions  changes in lending at nondepository financial institutions and other nonfinancial institutions  foreign sources

5 How Credit Matters  To the extent that lending bypasses domestic depository institutions, the linkage between the money supply and economic activity may be weakened  this makes the job of the Fed more difficult 信用量（贷款扩张）也是决定支出与收入变化 的关键因素。随着储蓄机构在信贷业务中所占 份额的降低，货币总量与经济活动之间的关系 也在弱化。

6 Money, Credit and the Economy  The growth rate of economic activity is measured by the growth rate of real gross domestic product (real GDP)  the inflation-adjusted quantity of final goods and services produced in an economy in a given time period  实际国内生产总值：在一定时期内，一个经济体 所生产出来的实际的或是通货膨胀调整后的最终 产品和劳务的产出。

7 Money, Credit and the Economy  Money and credit flows have a lot to do with fluctuations in economic activity  when the money supply and credit growth rates rise significantly, the general tendency is for real GDP to also grow  when the money supply and credit growth rates drop significantly, real GDP growth also tends to fall 货币供给、信用和利率的变化通常会改变经济中对商品 和劳务的总需求，总需求的改变又会影响整个产出和价 格水平。具体说，货币供给或信用量的增长以及随之而 来的利率下跌通常会增加总需求，进而导致生产的扩张 和价格的上涨。

8 Money, Credit and the Economy  There is also a relationship between the growth rate of money and credit and the rate of inflation  the consumer price index (CPI) measures the cost of a market basket of goods and services that a typical consumer purchases  the rate of change of the CPI measures the inflation rate  消费者价格指数：用于度量有代表性的城市居民消费 者购买的一篮子商品和劳务所需支付的成本的指标。

9 Money, Credit and the Economy  Whenever aggregate demand increases, there is a general tendency for output to rise fairly quickly and for prices to rise more gradually  Whenever aggregate demand falls, there is a general tendency for output to fall fairly quickly and for prices to respond with a lag

10 Money, Credit and the Economy  Nominal gross domestic product (nominal GDP) is the quantity of final goods and services produced in an economy during a given time period and valued at today’s prices  changes in money and credit are more closely correlated with changes in nominal GDP than with changes in real GDP  名义国内生产总值：在一定时期内，一个经济体所生产 的、以当前价格计算出来的最终产品和劳务的产出。

11 Money, Output, and Inflation Sustained Rise in Money and Credit Growth Rate Sustained Fall in Money and Credit Growth Rate Increases in Output (Real and Nominal GDP) Decreases in Output (Real and Nominal GDP) Increases in Inflation with a Lag Decreases in Inflation with a Lag 货币供给或信用持续大幅度上升会增加产出；在某些时候，有一定时滞的增加通货膨胀率； 反之货币供给或信用增长的持续大幅度下降会降低产出；在某些时候，有一定时滞的 降低通货膨胀率。

12 Are Money and Credit all that matter?  The correlations among money supply growth, credit flows, the inflation rate, and real GDP are not perfect  this implies that changes in the growth rate of the money supply or credit are not the only factors that influence inflation and economic activity  货币供给增长率、信用量和通货膨胀、、生产增长率之 间不具有强相关性，这说明其他因素，如现行的财政政 策及预期，也会影响通货膨胀和经济增长。也就是说， 货币和信用不能决定 “ 问题的全部 ” 。

13 Money and Credit  Other factors can exert a powerful influence on prices and output, especially in the short run  fiscal policy  expectations about future monetary and fiscal policy  expectations about future inflation

14 Money and Credit Flows  Economists do not fully agree on the past or current role of money in the economy  in the 1970s, the economics profession was dominated by monetarists  economists who believe that money matters more than anything else in determining the overall health of the economy  货币主义：强调货币在经济整体健康发展中的重要 作用的经济学流派。  other economists focus on credit flows that trigger changes in spending and others believe that money and credit are the only two important flows in the economy  still others believe that money and /or credit flows are only two among many factors affecting the economy.

15  few dispute the contention that the weight of the historical evidence produced by economists indicates that changes in the growth rates of money and credit exert a powerful influence on spending, production, inflation and unemployment.  关于货币和信用的具体作用，经济学领域一直存 在争论：它们起多大的作用？具体怎样起作用？ 然而，因为有大量历史证据的证明，所以人们大 都承认货币和信用对经济存在强有力的影响，尽 管这种影响处于不断变化当中。

16 Summary of Major Points  Firms and households meet in three separate markets  firms supply goods and services to the product market, demand investment goods supplied by other firms, demand factor services in the factor market, and demand funds from the financial system  households demand goods and services in the product market, supply factor services in the factor market, and supply funds to the financial system

17 Summary of Major Points  The interest rate is the cost to borrowers of obtaining money and the return on money to lenders  it is the cost of credit  the quantity demanded of money and the interest rate are inversely related

18 Summary of Major Points  The demand for money is determined by the spending plans of spending units, which are usually positively related to income  The supply of money is strongly influenced by the Fed through its control over reserves and the required reserve ratio

19 Summary of Major Points  The interaction between the supply of and the demand for money determines the equilibrium quantity of money and the equilibrium interest rate  the initial effect of either an increase in the money supply or a decrease in money demand will be a fall in the interest rate  the initial effect of either a decrease in the money supply or an increase in money demand will be a rise in the interest rate

20 Summary of Major Points  Credit flows (loan extensions) are also a key determinant of changes in spending and income  as depository institutions handle a declining share of credit, the relationship between the monetary aggregates and economic activity may be diminished

21 Summary of Major Points  Changes in the money supply, credit, and the interest rate will generally alter the aggregate demand for goods and services  changes in aggregate demand will, in turn, affect the overall level of output and prices  a rise in the money supply and/or credit flows and the accompanying fall in the interest rate will generally raise aggregate demand and lead to an expansion of output and some rise in prices

22 Summary of Major Points  Historical data suggest that a sustained and significant rise in money supply or credit growth will tend to increase output growth and, with a lag, tend at times to raise the inflation rate  A sustained and significant fall in money supply or credit growth will tend to decrease output growth and, with a lag, tend at times to lower the inflation rate

23 Summary of Major Points  The correlations among the rate of money supply growth, credit flows, and both inflation and output growth are far from perfect  other factors such as current fiscal policy and expectations also influence inflation and economic activity  money and credit flows are not “all that matter”

24 Summary of Major Points  Controversy does exist within the economics profession about the specific role of money and credit  how much do they matter and how precisely do they matter?  few dispute the contention that the weight of the historical evidence indicates that money and credit flows exert a powerful, although changing, influence on the economy