Liquidity: assets are not money bc they r not liquid, the ease in which an asset can be

converted into cash w/o much loss of value: for ex, house today worth more money than
tomorrow
Dm: demand for money
High interest -> low demand for money bc sending to bank is more profitable than keep it
in ur pocket
And vice versa
shifters of money demand
- Price levels
- Tech
Supply of money is always vertical bc it’s independent of interest rate but by the FED
When FED increase money supply, interest rate down, investment up
Expansionary: supply shift parallel, interest rate down, gdp up
Contractionary: opposite
Reserve ratio From 10 to 3 -> money supply increase, others” decreaase