1. Money Supply and Money Demand Curve
Student Name
ECON2105-B
“The Federal Reserve said it will purchase $200 billion in securities…

2. Money Supply and Demand before Fed decision
Nominal Interest Rate MS
EQNIR MD
EQ QM
Quantity of money
(trillions of dollars)
Baseline money supply and money demand before the Federal Reserve decided to purchase securities on the open market.

3. Money Supply and Demand after Fed decision
MS0
MS1
Nominal Interest Rate
Federal Reserve will put more money into the open market by purchasing securities.
EQ NIR0
EQ NIR1 MD EQ
QM1
Quantity of money
(trillions of dollars)
The influx of money from the Fed will increase the Money Supplied.
In the short term, this causes a decrease in the nominal interest rate. EQ
QM0
This decrease in the nominal
interest rate causes the
quantity of money demanded
to increase.