Money and Banking Chapter 13
Monetary Aggregates: M1, M2, & M3 Chapter 13 Table 13.1 Monetary Aggregates: M1, M2, & M3
Demand for Money Transactions Demand Depends on Income (Y) Asset Demand Depends (Inversely) on Interest Rates (r) r is the opportunity cost of holding currency or a checking account balance r is the interest you give up by holding money
Chapter 13 Figure 13.1 Total Demand for Money
The Money Market and the Interest Rate Changes in the Supply of Money move the Money Market out of Equilibrium When the Supply of Money (MS or SM) is increased There is a surplus of money People respond by buying bonds with the surplus money The additional demand for bonds Increases the price of bonds Lowering the interest rate Reestablishing equilibrium in the Money Market
Chapter 13 Figure 13.2
The Money Market and the Interest Rate: Decreasing the Money Supply When the Supply of Money (MS or SM) is decreased There is now a shortage of money People respond by selling bonds to acquire more money The additional supply of bonds Lowers the price of bonds Raising the interest rate Reestablishing equilibrium in the Money Market
Chapter 13 Figure 13.2
Structure of the Federal Reserve System Chapter 13 Figure 13.3 Structure of the Federal Reserve System
The 12 Federal Reserve Districts and Banks Chapter 13 Figure 13.4 The 12 Federal Reserve Districts and Banks
Kinds of Financial Institutions Chapter 13 Table 13.2 Kinds of Financial Institutions