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For more information, please see full course syllabus of AP Macroeconomics
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Lecture Comments (2)

1 answer

Last reply by: Professor Jibin Park
Tue Mar 22, 2016 12:23 PM

Post by Xiaming Jin on March 9, 2016

Why real GDP causes shif of MD instead of nominal GDP?? I think money demand curve still should shift to right if nominal GDP increase. Or actually we consider inflation rate here and should devide it when we talk about money demand?

The Money Market

  • There is an opportunity cost of holding money
  • As interest rates go up, the opportunity cost of holding onto money increases and so the quantity demanded decreases
  • As interest rates go down, the opportunity cost of holding onto money decreases and so the quantity demanded increases
  • The following causes the Money Demand curve to shift
    • Changes in Aggregate Price Levels
    • Changes in real GDP
    • Changes in technology
    • Changes in Institutions
  • The Fed uses three tools in controlling the money supply: Open Market Operations, Changing Reserve Requirements and Lending through the Discount Window

The Money Market

Lecture Slides are screen-captured images of important points in the lecture. Students can download and print out these lecture slide images to do practice problems as well as take notes while watching the lecture.

  • Intro 0:00
  • Lesson Overview 0:04
  • Opportunity Cost of Holding Money 0:57
    • Can't Be Used to Invest in Other Assets
    • 2007 Federal Funds Rate
    • 2008 Federal Funds Rate
    • 2009 Federal Funds Rate
  • The Money Demand Curve 5:01
  • Shifts of the Money Demand Curve 6:29
    • Changes in the Aggregate Price Level
    • Changes in Real GDP
    • Changes in Technology
    • Changes in Institutions
  • Money and Interest Rates 13:24
    • FOCM Sets up the Target Federal Funds Rate
    • Lower Federal Funds Rate
    • 0% Federal Funds Rate Era
  • Liquidity Preference Model 16:56
    • Liquidity Preference Model of the Interest Rate
    • Open Market Operations
    • Changing Reserve Requirements
    • Lending Through the Discount Window
  • Equilibrium in the Money Market 19:52
  • Example 1 21:19
  • Example 2 23:21
  • Example 3 26:22
  • Example 4 30:14