28.1 Money and The Interest Rate
MyEconLab Concept Video
To understand the Fed’s influence on the interest rate, we study the demand for money, the supply of money, and the forces that bring equilibrium in the market for money. We’ll begin with the demand for money.
The Demand for Money
The amount of money that households and firms choose to hold is the quantity of money demanded. What determines the quantity of money demanded? The answer is the “price” of money. But what is that “price”?
Two possible answers, both correct, are the value of money and the opportunity cost of holding money. The value of money is the quantity of goods and services that ...
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