1. The Role of Money and Credit
CHAPTER 3
The Role of Money and Credit

2. The Demand for Money
Interest Rate
(Percent)
Quantity of Money
Demand

3. Changes in the Quantity Demanded of Money Versus Changes in the Demand for Money
Interest Rate (Percent)
(b) Quantity of Money
Decrease
Increase
Demand
Interest Rate (Percent)
(a) Quantity of Money
Demand 5 3

4. The Supply of Money
Quantity of Money
Interest Rate (Percent)

5. Changes in the Supply of Money
Quantity of Money
Interest Rate (Percent)
Supply
Decrease
Increase

6. Market Equilibrium Supply Interest Rate (Percent) ie Demand
Quantity of Money

7. An Increase in the Demand for Money
Quantity of Money
Interest Rate (Percent) i' e
Supply
Demand i DD
D'D'

8. An Increase in the Supply of Money
Interest Rate (Percent) SS
S'S' i e i' e
Demand
Quantity of Money

9. How Money Matters: An Illustration
Federal
Reserve
Acts
Interest Rates,
Money Supply,
and Credit
Flows Changes
Aggregate
Demand for
Goods and
Services
Shifts
Economy’s
Output and
Prices
Respond

10. Money, Output, and Inflation
Sustained
Rise in Money
and Credit
Growth Rate
Increases in Output
(Real and Nominal GDP)
Increases in
Inflation with a Lag
Sustained
Fall in Money
and Credit
Growth Rate
Decreases in Output
(Real and Nominal GDP)
Decreases in
Inflation with a Lag