Finance note

Essay text:

„This will make it no feasible for them to do anything with their exchange rates,” he said. The draft Monetary Union Treaty spells out the functions of a proposed GCC monetary authoritym which will eventually becoma the region’s currency- issuing central bank, eplacing the current national authorities. The draft treaty…” Pegging: a direct , strict switching between the home currency and the USD. They are going to use an indirect currency system. Floating: constant movement of the currency exchange. § Syllabus is available from this week Question for the case study What will be the Persian Gulf Monetary Union about? Which other monetariay union have you heard of? What could have been the rationale for the Persian Gulf states behind pegging their currencies to the USD? 2nd consultation The monetary supply process and the demand for money supply: offering something (kinalat) demand: (kereslet) market: demand and supply side households give orders to money supply side: banks Supply of money Composition of the two-tier banking system => two levels : upper: central bank Central Bank: came from England, it was the first central bank in Europe Surveillance of the purchasing power of the domestic currency, inflation targeting purchasing power: the nominal purchasing power of EURO is higher than the HUF’s t0: Savings: posessing some amount of money (hold it or invest it) p0: price level c Nominal interest rate - (5%) Inflation rate = Real interest rate: can be expressed by the goods, c services, which we can consume t1: Consume: more money p1: price level (might be higher) The purchasing power is constant if the rate of inflation is moderate...