How does an increase in price level affect the money market? a. Money demand increases b. Money supply decreases c. Money demand decreases d. Money supply increases
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How does an increase in price level affect the
a. Money demand increases
b. Money supply decreases
c. Money demand decreases
d. Money supply increases
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- Suppose there is an increase in money supply, as a result interest rates will Multiple Choice rise and the quantity of money will increases. fall and the quantity of money will remain constant. rise and the quantity of money will decrease. fall and the quantity of money will increases.An increase in the money supply creates A. An excess supply of money that is eliminated by rising prices B. An excess supply of money that is eliminated by falling prices C. An excess demand for money that is eliminated by rising prices D. An excess demand for money that is eliminated by falling pricesWhen the money market is drawn with the value of money on the vertical axis, a decrease in the money supply leads people to O spend more so the value of a dollar falls. spend less so the value of a dollar falls. O spend more so the value of a dollar rises. spend less so the value of a dollar rises. W
- The interest rate falls if a. the price level falls or the money supply rises. b. the price level rises or the money supply falls. c. the price level falls or the money supply falls. d. the price level rises or the money supply rises.Suppose that when everyone wakes up tomorrow, they discover that thegovernment has given them an additional amount of money equal to the amountthey already had. Explain what effect this doubling of the money supply willlikely have on the following:a. The total amount spent on goods and servicesb. The quantity of goods and services purchased if prices are stickyc. The prices of goods and services if prices can adjust?In the graph below (the market for money), the Rate of interest price of a dollar 12 10 8 4 2 50 ✔interest rate ✔price of borrowing or lending money O purchasing power S 100 250 Quantity of money demanded & supplied (billions of dollars) 150 is determined by the total demand for money intersecting with the total supply of money. 200 D
- Equilibrium in the money market occurs when Select one: a. the transactions demand for money equals the precautionary demand for money. b. the quantity of money demanded is more than the quantity of money supplied in the economy. c. the quantity of money demanded equals the quantity of money supplied in the economy. d. the quantity of money demanded is less than the quantity of money supplied in the economy.Value of Money 2 1 I MS1 1 19 U MS2 D Money Demand Quantity of Money money supply is MS1 and the value of money is 1, then there is a shortage in Select one: a. supply of money that is represented by the distance between points A and C. b. demand for money that is represented by the distance between points C and D. c. supply of money that is represented by the distance between points C and D. d. demand for money that is represented by the distance between points A and C. Refer to figure. If theWhen the supply for money increases and the demand for money reduces, there will be a. A fall in the level of prices b. An increase in the rate of interest c. A fall in the level of demand d. A decrease in the rate of interest
- When the Federal Reserve increases the money supply, people spend more because they now have more money. O True O FalseThe figure shows the demand for money curve in Epsilon. The Fed wants the interest rate to be 6 percent a year. If the interest rate is 5 percent a year, do people buy or sell bonds? Question Help Does the price of a bond rise or fall? Does the interest rate rise or fall? Interest rate (percent per year) 7- Draw the supply of money curve if the Fed wants the interest rate to be 6 percent a year. Label it. Draw a point at the equilibrium in the money market. 6- If the interest rate is 5 percent, people will bonds. 5- Bond prices and the interest rate will O A. fall; fall 4- B. rise; fall C. rise; rise MD O D. fall; rise 3+ 2.8 2.9 3.0 3.1 3.2 Real money (trillions of 2005 dollars) >>> Draw only the objects specified in the question. Click the graph, choose a tool in the palette and follow the instructions to create your graph. DII 888 F12 F10 F11 F7 F8 F9 F5 F6 esc F2 F4 F3 F1 & # ! delete %3D 4 5 6 7 8 1 P T Y Q W tab J K F A caps lock M C V shift option command command option fn…The following table shows a money demand schedule, which is the quantity of money demanded at various price levels (P). Fill in the Value of Money column in the following table. Quantity of Money Demanded Price Level (P) Value of Money (1/P) (Billions of dollars) 1.00 1.5 1.33 2.0 2.00 3.5 4.00 7.0 Now consider the relationship between the price level and the quantity of money that people demand. The lower the price level, the money the typical transaction requires, and the money people will wish to hold in the form of currency or demand deposits. Assume that the Fed initially fixes the quantity of money supplied at $3.5 billion. Use the orange line (square symbol) to plot the initial money supply (MS1 ) set by the Fed. Then, referring to the previous table, use the blue connected points (circle symbol) to graph the money demand curve.