Interest Rate Determination
Here, you will learn about determining interest rates and how supply and demand play a role in determining interest rates. Pay attention to the Fed's role in this determination and to the effects of the increase of money supply on interest rates. What are the determinants of interest rates?
Money Supply Measures
LEARNING OBJECTIVE
- Learn the various definitions of money supply and their approximate values in the U.S. economy.
In the United States, the Federal Reserve Bank (or "Federal Reserve," and more informally, "the Fed") reports several distinct measures of the aggregate money supply. The narrowest measure, M1, includes only the most liquid assets. Higher numbers following an "M" reflect broader measures of money that include less liquid assets. Below is a description of M1–M3. However, unless otherwise specified, all later references to the money supply will relate to the M1 definition.