research on framework of money market equlibrium

economics

1. Framework of Money Market Presented by (Group 7)

2. Introduction (Group 7)

3. Table of Contents 01 02 03 04 Demand for Money Supply for Money Money Market Equilibrium Quantity theory of Money

4. MONEY MARKET A money market is a segment of the financial market for short-term borrowing and lending. It provides high liquidity and low-risk investment options

5. The quantity of money that people plan to hold depends on four main factors The price level The nominal interest rate Real GDP Financial innovation Influence on Money holding

6. Demand for money is the relationship between the quantity of real money demanded and the nominal interest rate when all other influences on the amount of money that people wish to hold remain the same. Demand for Money Market

7. The demand for money curve (MD) represents the quantity of real money people plan to hold versus the nominal interest rate; a change in interest rates causes movement along the curve. Demand for Money Market curve

8. A change in real GDP or financial innovation changes the demand for money and shifts the demand for money curve. Shifts in the Demand for Money Market Curve

9. Supply for money market means the total amount of funds available for short-term borrowing and lending, influenced by central bank policies and commercial bank activities. Supply for Money Market

10. The supply for money is the relationship between the quantity of real money supplied and the nominal interest rate when all other influences on the amount of money that people wish to hold remain the same. Supply of Money Market Curve

11. A change in real GDP or financial innovation changes the supply for money and shifts the demand for money curve. Shift in the Supply of Money Market Curve

12. Money market equilibrium occurs when the quantity of money demanded equals the quantity of money supplied. There are two types of money market equlibrium Short-Run Equilibrium Long-Run Equilibrium Money Market Equilibrium

13. In the money market, equilibrium happens when the quantity of money demanded matches the quantity supplied. In the short run, real GDP shapes the demand for money curve (MD), while the Fed determines the quantity of real money supplied and the supply of money curve (MS). The interest rate adjusts to reach this equilibrium point. Money Market Equilibrium Curve

14. Shift in the Money Market Equilibrium Curve A shift in money supply equilibrium, driven by factors like central bank policies or economic growth, affects interest rates, inflation, and aggregate demand. Expansionary monetary policies increase the money supply, lowering interest rates and boosting economic activity. Conversely, contractionary policies decrease the money supply, raising interest rates and potentially slowing down the economy.

15. The theory that the price level is proportional to the quantity of money. This is expressed by the quantity equation,  MV = PT , where M is the quantity of money, V is the velocity of circulation, P is the price level, and T is the volume of transactions The Quantity Theory of Money

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