1. The Money Market
Lesson 32
Sections 28, 29

2. The Demand for Money The Opportunity Cost of Holding Money
Convenience
Interest Rates
Short Term Interest Rates Move Together
As investors look for the best interest rates
Effects the demand for money
Long Term Interest Rates
Bonds, IRAs
Expectations of what short term interest rates will do in the future

3. Money Demand Curve Shifts in the Money Demand Curve
Changes in Aggregate Price Levels
Changes in Real GDP
Changes in Technology
Changes in Institutions
Money and Interest Rates
Equilibrium Interest Rate

4. The Market for Loanable Funds
The Equilibrium Interest Rates
Loanable Funds Market
Hypothetical market that satisfies all savers and borrowers
Rate of Return
[(Revenue from Project – Cost of Project)/Cost of Project]/100
Shifts in Demand for Loanable Funds
Changes in Perceived Business Opportunities
Changes in Government Borrowing
Crowding Out
Shifts of the Supply of Loanable Funds
Changes in Private Savings Behavior
Changes in Capital Inflow
Inflation and Interest Rates

5. Reconciling The Two Interest Rate Models
Liquidity Preference
Loanable Funds Model
Interest Rates in the Short Run
Interest Rates in the Long Run