The Money Market (1 of 2)- Macro Topic 4.5

Mr. Clifford introduces the money market graph, a key concept for the AP macro exam. He explains the definition of money, focusing on M1, which includes cash, traveler's checks, and checkable deposits. The video distinguishes money from wealth, emphasizing liquidity. The demand for money is driven by transaction and asset demands, influenced by interest rates. The supply of money is controlled by the central bank and is unaffected by interest rates. The video concludes with an explanation of monetary policy, detailing how the Federal Reserve uses it to influence the economy through interest rates.

Describe how the interest rate affects the demand for money.

What are the three shifters of the money supply mentioned in the text?