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The Money Supply on the Graph definitions

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  • Money Supply Curve
    A vertical line on the graph, representing a fixed amount of money in circulation, set by the Federal Reserve regardless of interest rates.
  • Federal Reserve
    The institution responsible for controlling the quantity of money available to the public through monetary policy actions.
  • Interest Rate
    The price of money, shown on the y-axis, which adjusts to balance money supply and demand in the market.
  • Open Market Operations
    Actions involving the purchase or sale of Treasury securities to shift the money supply and influence equilibrium interest rates.
  • Treasury Bills
    Short-term government securities used by the Federal Reserve in open market operations to adjust the money supply.
  • Money Demand Curve
    A downward-sloping line on the graph, showing how the public's desire for money changes as interest rates vary.
  • Equilibrium Interest Rate
    The rate at which the quantity of money supplied equals the quantity demanded, determined by the intersection of supply and demand curves.
  • Liquidity Preference Theory
    A concept applying supply and demand principles to the money market, explaining how interest rates are set.
  • M1
    A measure of money supply including currency in circulation and checking account deposits, used for analysis in this context.
  • Currency
    Physical cash in circulation, part of the money supply available to the public and included in M1.
  • Checking Deposits
    Bank account balances accessible for spending, forming a component of the money supply considered in M1.
  • Quantity of Money
    The total amount of dollars available for use by the public, set by the Federal Reserve and shown on the x-axis.
  • Monetary Policy
    The strategy used by the Federal Reserve to achieve economic goals by adjusting the money supply through open market operations.
  • Equilibrium Quantity of Money
    The fixed amount of money in the market at which supply and demand balance, determined by Federal Reserve actions.