money market graph why do we have it? what makes the demand curve move?

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Money Market Graph Why do we have it? What makes the demand curve move?

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The Opportunity Cost of Holding Money The opportunity cost of holding money Changes with the overall level of interest rates Short term interest rates Long-term interest rates

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Page 1: Money Market Graph Why do we have it? What makes the demand curve move?

Money Market GraphWhy do we have it? What makes the demand curve move?

Page 2: Money Market Graph Why do we have it? What makes the demand curve move?

What is this about?• What is the money demand curve?

• Why does the liquidity preference model determine the interest rate in the short run?

Page 3: Money Market Graph Why do we have it? What makes the demand curve move?

The Opportunity Cost of Holding Money• The opportunity cost of holding money

• Changes with the overall level of interest rates

• Short term interest rates

• Long-term interest rates

Page 4: Money Market Graph Why do we have it? What makes the demand curve move?

The Money Demand Curve• Money Demand

• The reason for money demand’s downward slope

Page 5: Money Market Graph Why do we have it? What makes the demand curve move?

Shifts of the Money Demand Curve• Price Level

• Real GDP

• Technology

• Institutions

Page 6: Money Market Graph Why do we have it? What makes the demand curve move?

The Equilibrium Interest Rate• Liquidity Preference Model of

the Interest Rate

• Money Supply

Page 7: Money Market Graph Why do we have it? What makes the demand curve move?

Two Models of the Interest Rate