When the money market is drawn with the value of money on the vertical axis, an increase in the money supply shifts the money supply curve to the a) right, lowering the price level. b) left, raising the price level. c) right, raising the price level. d) left, lowering the price level.
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- In 2019, The Fed was liquidating their balance sheet (meaning they were selling off the bonds and securities purchased in The Great Recession 2007-2009). That means they are trying to do what in regards to the supply of money. O Increase O Decrease O Create a money stream to increase supply of money O Increase their Capital GainsSuppose 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?Which of the following would lead to a decrease in the equilibrium interest rate? O a. Decrease the money demand O b. Decrease the money supply Ос. Increase in money demand O d. Increase the money supply O e. Directly lower the interest rate and change neither the money demand nor the money supply
- The table below describes two different demands for money and the supply of money. Answer the following questions based on this table. Instructions: Enter your answers as a whole number. Total Demand for Money Price of Money Money Supply Demand 1 Demand 2 Total Money Demand 1 $400 $300 $150 $ 2 400 250 150 3 400 200 150 400 150 150 5 400 100 150 a. What is the price of money? O Consumer Price Index O Interest rate O Inflation rate O Production rate b. What type of demand for money does Demand 1 represent? O Unit-of-account demand O Asset demand O Total demand O Transaction demand c. What type of demand for money does Demand 2 represent? O Total demand O Unit-of-account demand O Transaction demand O Asset demand d. Complete the "Total Money Demand" column in the above table.1. Suppose that the economy has the following money supply and demand equations: Money Supply: M = 8000Money Demand: M= 10,000 – 40,000rwhere money is in billions of dollars and interest rates, r , is written as a decimal(e.g., an interest rate of 10% would be written as .1 in the equation).A. Determine the equilibrium interest rate and quantity of money.B. What will happen in the money market if the interest rate is currently 10%?What is the amount of excess supply of or excess demand for money?C. Show in graph that at this interest rate (10%) there is disequilibrium in themoney market.If interest rates decrease: O the quantity of money demanded will not change. O the money demand curve will shift to the right. the quantity of money demanded will decrease. O the money demand curve will shit to the left. the quantity of money demanded will increase.
- 8. The goods and money markets are in equilibrium at point/s a. a b. b C. C d. a and b * y* Figure 1. •C LM IS Y 9. Which of the following statements relating to Figure 1 is/are correct? a. The money market is in equilibrium at point b. b. The goods and money markets are in equilibrium at point a. c. The goods market is in equilibrium at point a. d. All of the aboveDue to the increased use of credit cards, people now carry around less cash. This would be represented in a money market diagram as O a. a rightward shift in the demand for money curve. O b. no movement along the demand curve for money nor a shift in the demand curve. Oc. a leftward shift in the demand for money curve. Od. a movement upward along the demand for money curve. O . a movement downward along the demand for money curve.2. Consider the money market model. If the current price is higher than the equilibrium price, would the money demand greater or smaller than the money supply? And how would the value of money will change in the adjustment toward the equilibrium? Decrease or Increase. Money demand(greater:smaller):Value of money (increase/decrease):
- When the nominal interest rate falls, the opportunity cost of holding money O A. decreases and there is a movement downward along the demand for money curve. O B. increases and there is a movement upward along the demand for money curve. OC. decreases and the demand for money curve shifts rightward. D. decreases and the demand for money curve shifts leftward. O E. increases and the demand for money curve shifts rightward.Suppose that the economy has the following money supply and demand equations: Money Supply: M = 8000Money Demand: M= 10,000 – 40,000rwhere money is in billions of dollars and interest rates, r , is written as a decimal(e.g., an interest rate of 10% would be written as .1 in the equation).A. Determine the equilibrium interest rate and quantity of money.B. What will happen in the money market if the interest rate is currently 10%?What is the amount of excess supply of or excess demand for money?C. Show in graph that at this interest rate (10%) there is disequilibrium in themoney market.2. Assume that a particular bank has excess reserves of Php800,000 and checkabledeposits of Php1,500,000. If the reserve ratio is 20%, what is the size of the bank’sactual reserves?3. Suppose that GRAB Bank is a newly created bank in your hometown. Consider thefollowing transactions: Owners of the bank sold shares of stocks to the public (which includes owners’equity) amounting to P1,000,000. To fully…Suppose that the economy has the following money supply and demand equations: Money Supply: M = 8000Money Demand: M= 10,000 – 40,000rwhere money is in billions of dollars and interest rates, r , is written as a decimal(e.g., an interest rate of 10% would be written as .1 in the equation).A. Determine the equilibrium interest rate and quantity of money.B. What will happen in the money market if the interest rate is currently 10%?
