Topic > The key functions of money and the money market

It is therefore the RBA's responsibility to ensure that monetary policy is used to the greatest advantage for all Australians. The overall stability of the Australian currency is controlled by this bank. There is a need for the RBA to maintain full employment across Australia, resulting in economic prosperity. The wellbeing of people must be at the heart of the Reserve Bank of Australia's responsibilities. It is responsible for keeping the money market in balance by adjusting interest rates in the economy. How can the RBA control the money market and where is the equilibrium? Equilibrium in the money market is the point at which the demand for money meets the supply of money. The equilibrium interest rate is chosen when the demand for money meets the quantity of money supplied. Interest rates are changed by the RBA to reach equilibrium (Sloman, Norris & Garrett, 2014, p.271). On the money market chart there are two lines. The money supply is the purple vertical line and shows the quantity of money within the economy. Money Demand is in orange and shows how much demand there is for money. The point of intersection is equilibrium