Money Market – AP Macroeconomics

1. The money supply curve is vertical because:

Banks set it based on demand The Fed controls MS independent of interest rates Interest rates don't matter Congress determines money supply

2. If the Fed buys bonds:

MS decreases, i increases MS increases, i decreases MS stays same, i decreases MS decreases, i decreases

3. Lower interest rates lead to:

Decreased investment and AD Increased investment and AD No change in AD Decreased consumption only