AP MacroeconomicsMoney & Monetary Policy
Money Market
The money market is the model in which the supply of and demand for money determine the nominal interest rate.
The money supply is vertical because the central bank sets it, and money demand slopes downward. Their intersection sets the equilibrium nominal interest rate. Expansionary monetary policy shifts money supply right, lowering interest rates.
Formula / Example
Equilibrium: Money supply = Money demand → nominal interest rate.
Interactive graph
Money Market →
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Study module
Monetary Policy →
Full lesson, practice questions, and flashcards.