1. Money and Banking
Chapter 13

3. Monetary Aggregates: M1, M2, & M3
Chapter 13 Table 13.1
Monetary Aggregates: M1, M2, & M3

5. Demand for Money Transactions Demand Depends on Income (Y)
Asset Demand
Depends (Inversely) on Interest Rates (r)
r is the opportunity cost of holding currency or a checking account balance
r is the interest you give up by holding money

6. Chapter 13 Figure 13.1
Total Demand for Money

8. The Money Market and the Interest Rate
Changes in the Supply of Money move the Money Market out of Equilibrium
When the Supply of Money (MS or SM) is increased
There is a surplus of money
People respond by buying bonds with the surplus money
The additional demand for bonds
Increases the price of bonds
Lowering the interest rate
Reestablishing equilibrium in the Money Market

9. Chapter 13 Figure 13.2

11. The Money Market and the Interest Rate: Decreasing the Money Supply
When the Supply of Money (MS or SM) is decreased
There is now a shortage of money
People respond by selling bonds to acquire more money
The additional supply of bonds
Lowers the price of bonds
Raising the interest rate
Reestablishing equilibrium in the Money Market

12. Chapter 13 Figure 13.2

14. Structure of the Federal Reserve System
Chapter 13 Figure 13.3
Structure of the Federal Reserve System

16. The 12 Federal Reserve Districts and Banks
Chapter 13 Figure 13.4
The 12 Federal Reserve Districts and Banks

18. Kinds of Financial Institutions
Chapter 13 Table 13.2
Kinds of Financial Institutions