ECONOMICS SECOND EDITION ROBERT E HALL STANFORD UNIVERSITY

ECONOMICS SECOND EDITION ROBERT E. HALL STANFORD UNIVERSITY MARC LIEBERMAN NEW YORK UNIVERSITY CHAPTER 25 THE MONEY MARKET AND THE INTEREST RATE

Figure 2 A Shift in the Demand for Money Interest Rate 6% E G F 3% H M d 1 500 ECONOMICS 2 e / HALL & LIEBERMAN CHAPTER 25 / THE MONEY MARKET AND THE INTEREST RATE © 2001 South-Western 700 800 1, 000 M 2 d Money ($ Billions)

Figure 3 Shifts and Movements Along the Money Demand Curve: A Summary ECONOMICS 2

Figure 4 The Supply of Money Interest Rate s M 1 s M 2

Figure 5 Money Market Equilibrium ECONOMICS 2 e / HALL & LIEBERMAN CHAPTER 25

Figure 6 An Increase in the Money Supply Interest Rate s M 1 s M 2 E 6% F 3% Md 500 ECONOMICS 2 e / HALL & LIEBERMAN CHAPTER 25 / THE MONEY MARKET AND THE INTEREST RATE © 2001 South-Western 800 Money ($ Billions)

Figure 7 The Fed in Action ECONOMICS 2 e / HALL & LIEBERMAN CHAPTER

Figure 8 Monetary Policy and the Economy (b) (a) Interest Rate 6% s M 1 s AE r = 4. 5% H AE r = 6% 10 Real GDP ($ Trillions) E E H 4. 5% 3% Real Aggregate Expenditures ($ Trillions) M 2 MYd = $10 trillion F MYd = $8 trillion 500 800 Money ($ Billions) ECONOMICS 2 e / HALL & LIEBERMAN CHAPTER 25 / THE MONEY MARKET AND THE INTEREST RATE © 2001 South-Western 45° 8

Figure 9 Fiscal Policy and the Money Market (a) Interest Rate M (b) Real Aggregate Expenditures ($ Trillions) s 8% L 6% E L F AE r = 8% AE r = 6% E d MY = $13. 5 trillion d MY = $10 trillion 500 Money ($ Billions) ECONOMICS 2 e / HALL & LIEBERMAN CHAPTER 25 / THE MONEY MARKET AND THE INTEREST RATE © 2001 South-Western 45° 10 13. 5 15 Real GDP ($ Trillions)

Figure 10 Interest Rate Expectations Interest Rate M s 10% 5% E M d 2 M 1 d 500 ECONOMICS 2 e / HALL & LIEBERMAN CHAPTER 25 / THE MONEY MARKET AND THE INTEREST RATE © 2001 South-Western Money ($ Billions)