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- The money demand market is currently in equilibrium with MS = MD and the equilibrium interest rate. Now suppose that there is an increase in the price level. this will lead to _____ in the equilibrium quantity of money and _____ in the equilibrium interest rate. Select one: a. a decrease; a rise b. no change; a rise c. no change; a fall d. an increase; a fall Please explainAn increase in perceived wealth due to an increase in stock prices will cause: Select one: a. right-shift of the aggregate demand curve. b. movement along the aggregate demand curve. c. left-shift of the aggregate supply curve. d. right-shift of the aggregate supply curve.Interest rate 3 The graph below illustrates the money demand and investment demand for the economies of Pabst and Kokanee. Pabst Kokanee a. If money supply is increased by 25, what will be the new interest rate? Round your answers to one decimal place. Pabst: % Kokanee: % b. What will be the increase in investment spending as a result of this new interest rate? Pabst: Kokanee: c. If the multiplier is 2 in each economy, what will be the increase in GDP? Pabst: Kokanee: d. In which economy would monetary policy be more effective in closing a recessionary gap? PabstKokanee 3 2 1 10 9 8 MD MS 33 Interest rate 2 1 7 6 (110,1.5) 0 70 80 90 100 110 120 10 20 30 40 50 60 70 80 90 100 Quantity of money Quantity of investment MS MD Kokanee Interest rate 3 10 9 8 2 1 70 90 100 110 120 130 0 Quantity of money 10 20 30 40 50 60 70 80 90 100 Quantity of investment
- When the supply of money increases, what happens to the interest rate? A. the interest rate decreases B. the interest rate increases Thanks z zIf 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.Which of the following will lead to an increase in the equilibrium interest rate in the money market? a. Increase in general price level O b. An increase in income O c. Decrease in general price level d. The Central Bank increases money supply
- 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?An increase in the interest rate decreases the opportunity cost of holding money. O True FalseWhen the Federal Reserve increases the money supply, people spend more because they now have more money. O True O False
- Which of the following reduces the interest rate? a. a decrease in government expenditures and a decrease in the money supply b. an increase in government expenditures and an increase in the money supply c. an increase in government expenditures and a decrease in the money supply d. a decrease in government expenditures and an increase in the money supplyWhen 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. WWhen the interest rate falls , other things remaining the same, what change occurs in the market for money? The opportunity cost of holding money _______ and _______. A. rises ; the demand for money decreases B. rises ; the quantity of money demanded decreases C. falls ; the quantity of money demanded increases D. falls ; the demand for money increases
