Money Market GraphWhy 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