Unit 4 – Money & Banking / Monetary Policy (3-26-16)

Ap Macroeconomics Unit 4- Money Market Graphs

Part 3

https://www.youtube.com/watch?v=gzFdeM6lUno&feature=bf_prev&list=PL2CB281D126F65E26&lf=results_video

Overview-

Money market graphs are labeled by y-axis: Interest rate x-axis: commodity (Qm) with a downward slopping demand for money due to Price is high then demand is low and vise versa, supply of money is vertical due to it not varying and is fixed by the Fed. The Money market graph also can only move right or left shifting demand for money not money supply unless changed by the Fed. The only way to change supply of money the Fed can increase or decrease the money supply during a rescission or during inflation. The government also only changes the money supply based upon interest rates and the government attempt to stabilizing interest rates.