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?
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
The Money Demand Curve
• Money Demand
• The reason for money demand’s
downward slope
Shifts of the Money Demand Curve
• Price Level
• Real GDP
• Technology
• Institutions
The Equilibrium Interest Rate
• Liquidity Preference Model of
the Interest Rate
• Money Supply
Two Models of the Interest Rate