Demand and supply for money

Factors that influence the demand of money
Interest rate – most critical
Higher interest rate => higher opportunity cost of cash => people less willing to hold money=> lower demand for money

Inflation
Higher inflation => increase in demand for nominal money

Real GDP growth
Higher real GDP growth => increases the demand for money (nominal and real)

Demand curve for money
Graph of money demanded versus interest rates is downward sloping and depends on interest rate, inflation, GDP

Supply curve for money
Controlled by the Fed. Graph of money supply versus interest rate is a vertical line.