Graphical representations of money markets are visualizations of a combination of an economy’s transactional demands plus an economy’s asset demands. By way of introduction to this subunit, individuals and organizations face choices regarding what they can do with their money. In terms of spending as it relates to what is known as the money market, individuals and organizations can buy stocks, bonds, imports, foreign currencies, goods and services, and so forth.
One interpretation of the money demand curve is based on an economy’s interest rate. This interpretation rests on the position of the supply of money and the interest rates on money. Regarding shifting factors, the money supply can increase based on lower interest rates or decrease based on higher interest rates.
Equilibrium interest rates
Prices, rates, and linkages: Currencies, stocks, and bonds
OpenStax College: “Macroeconomics, Chapter 16, Section 1: How the Foreign Exchange Market Works”
- Read this section about the exchange of currencies. Exchange rates relate the price of a country’s own currency compared to the price of another country’s currency mainly for the purpose of international trade. Trading partners need to convert their own currency into that of the country from which imports originate. For example, when the United States imports vehicles from Japan, the United States pays for them in Yen and needs to purchase that currency using US Dollars. In essence, the demand for and supply of currencies determine the exchange rate.
Lawrence Mitchell’s “Financial Speculation: The Good, the Bad, and the Parasitic”
- Read this article about the stock market and how expectations play a role in terms of changes in the price of a stock. Speculators tend to focus on changes in prices and attempt to sell at a price higher than they bought the stock. You will learn that a stock is a share of ownership in an organization, and its price is determined largely by the supply of and the demand for stocks in the stock market.
Graphical representations of money markets are visualizations of a combination of an economy’s transactional demands plus an economy’s asset demands. By way of introduction to this subunit, individuals and organizations face choices regarding what they can do with their money. In terms of spending as it relates to what is known as the money market, individuals and organizations can buy stocks, bonds, imports, foreign currencies, goods and services, and so forth.
One interpretation of the money demand curve is based on an economy’s interest rate. This interpretation rests on the position of the supply of money and the interest rates on money. Regarding shifting factors, the money supply can increase based on lower interest rates or decrease based on higher interest rates.
Equilibrium interest rates
Activities
Khan Academy: “Interest as Rent for Money”
Khan Academy: “Money Supply and Demand Impacting Interest Rates”
Prices, rates, and linkages: Currencies, stocks, and bonds
Activities
OpenStax College: “Macroeconomics, Chapter 16, Section 1: How the Foreign Exchange Market Works”
Lawrence Mitchell’s “Financial Speculation: The Good, the Bad, and the Parasitic”
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