MKT-3.A—a. Define (using graphs as appropriate) the money market, money demand, and money supply. b. Explain (using graphs as appropriate)…

a. Define (using graphs as appropriate) the money market, money demand, and money supply. b. Explain (using graphs as appropriate) the relationship between the nominal interest rate and the quantity of money demanded (supplied).

• The demand for money shows the inverse relationship between the nominal interest rate and the quantity of money people want to hold.
• Given a monetary base determined by a country’s central bank, money supply is independent of the nominal interest rate.
• Enduring understanding MKT-3: In the money market, demand for and supply of money determine the equilibrium nominal interest rate and influence the value of other financial assets.