The linear relationship between the M1 Money Supply and the 10-year Treasury Bonds
Concept introduction:
M1 Money Supply - In the US it implies the most liquid form of money. It is the currency or near currency and includes currency and money in checking accounts or demand deposits.
10-Year Treasury Bonds- It is the certificate or security issued by the US government against the loan it takes for a period of 10 years. The bond yields a given rate of return and this rate serves as the bench mark which dictates the interest rate in the economy.
Liquidity Effect- It refers to an economic predicament where a persistent rise in the exogenous supply of narrow money causes the nominal interest rates to fall. It upholds an inverse relationship between the M1 Money Supply and the Interest rate.
![Check Mark](/static/check-mark.png)
Want to see the full answer?
Check out a sample textbook solution![Blurred answer](/static/blurred-answer.jpg)
Chapter 5 Solutions
MYLAB ECONOMICS WITH PEARSON ETEXT -- A
- Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSONEngineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
- Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage LearningManagerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage LearningManagerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
![Text book image](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9780190931919/9780190931919_smallCoverImage.gif)
![Text book image](https://www.bartleby.com/isbn_cover_images/9780134078779/9780134078779_smallCoverImage.gif)
![Text book image](https://www.bartleby.com/isbn_cover_images/9780134870069/9780134870069_smallCoverImage.gif)
![Text book image](https://www.bartleby.com/isbn_cover_images/9781305585126/9781305585126_smallCoverImage.gif)
![Text book image](https://www.bartleby.com/isbn_cover_images/9781337106665/9781337106665_smallCoverImage.gif)
![Text book image](https://www.bartleby.com/isbn_cover_images/9781259290619/9781259290619_smallCoverImage.gif)