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Equilibrium in the Money MarketThe money supply curve, MS, is vertical at the money supply chosen by the Federal Reserve, image. The money market is in equilibrium at the interest rate rE: the quantity of money demanded by the public is equal to image, the quantity of money supplied. At a point such as L, the interest rate, rL, is below rE and the corresponding quantity of money demanded, ML, exceeds the money supply, image. In an attempt to shift their wealth out of nonmoney interest-bearing financial assets and raise their money holdings, investors drive the interest rate up to rE. At a point such as H, the interest rate rH is above rE and the corresponding quantity of money demanded, MH, is less than the money supply, image. In an attempt to shift out of money holdings into nonmoney interest-bearing financial assets, investors drive the interest rate down to rE.