AP Macroeconomics 4.5 Money Market Overview
Connect money demand and supply with equilibrium nominal interest rates, then analyse shifts caused by price levels and monetary policy.
- Syllabus
- Effective Fall 2025
- Course
- AP Macroeconomics
Covered syllabus points
MKT-3.A—a. Define (using graphs as appropriate) the money market, money demand, and money supply. b. Explain (using graphs as appropriate)…MKT-3.B—Define (using graphs as appropriate) equilibrium in the money marketMKT-3.C—Explain (using graphs as appropriate) how nominal interest rates adjust to restore equilibrium in the money marketMKT-3.D—a. Explain (using graphs as appropriate) the determinants of demand and supply in the money market. b. Explain (using graphs as…
4.5 The Money Market question 1
The money demand curve is downward sloping because
A
the transaction demand for money decreases as interest rates fall
B
people hold less money as the opportunity cost of holding money rises
C
money is less liquid as interest rates rise, so people are able to hold less of it
D
banks are more willing to create money when interest rates fall
E
with higher incomes, people are willing to hold smaller percentages of their money
4.5 The Money Market question 2
The table provided shows economic data for the country of Louland. The base year is year 1, and the GDP deflator in year 2 is 115.
How would the change in real GDP from year 1 to year 2 affect the demand for money and the nominal interest rate in Louland?
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