Money Market

- demand for money has an inverse relationship between nominal interest rate and quantity of money demanded

Money Demand Shifters :

1. ∆ in PL
2. ∆ in income
3. ∆ in taxation that affects investment

- demand is always downward sloping

- FED increases Money Supply , temporary surplus of money will occur at 5 % interest

- Fed decreases Money Supply , temporary shortage of money will cause interest rate to rise to 10 %