please also do the graphs thankyouuuu 4.754.501.01.11.21.31.4QUANTITY OF MONEY (Trillions of dollars)0.91.5MD 2013Suppose the Bank of Canada wants to keep 2014 interest rates at their 2013 level.On the previous graph, place the green line (triangle symbol) to indicate the new money supply curve if the Bank of Canada follows this policy. Thenuse the black point (plus symbol) to indicate the equilibrium interest rate and quantity of money in this case.investment responds to changes in the interest rateIn part becauserapidly increasing the money supply causes hyperinflationmarkets prefer low inflation to stable interest ratesrate of growth in the money supplyspecific level of M2tevel of M1interest rate, most central banks set monetary policy aimed at targeting a The following graph shows an increase in the demand for money from 2013 (MD2013) to 2014 (MD2014) caused by an increase in the price level.5.25%5.50%The initial equilibrium interest rate in 2013 was 5.75%6.00%6.25%Now suppose the Bank of Canada chooses not to alter the money supply between 2013 and 2014.On the following graph, use the grey point (star symbol) to illustrate the equilibrium interest rate and quantity of money that would result from thislack of intervention.NOMINAL INTEREST RATE (Percent)6.506.256.005.755.505.255.004.754.500.9Money Supply1.01.11.21.31.4QUANTITY OF MONEY (Trillions of dollars)1.5MD 2014MD 2013No InterventionNew MS Curve+With InterventionSuppose the Bank of Canada wants to keep 2014 interest rates at their 2013 level.

Why there is a need to decrease the money supply? In long run, a fall in money supply is to check…

The following graph shows an increase in the demand for money from 2013 (MD2013) to 2014 (MD2014) caused by an increase in the price level. 5.25% 5.50% The initial equilibrium interest rate in 2013 was 5.75% 6.00% 6.25% Now suppose the Bank of Canada chooses not to alter the money supply between 2013 and 2014. On the following graph, use the grey point (star symbol) to illustrate the equilibrium interest rate and quantity of money that would result from this lack of intervention. NOMINAL INTEREST RATE (Percent) 6.50 6.25 6.00 5.75 5.50 5.25 5.00 4.75 4.50 Money Supply 0.9 1.1 1.0 1.2 1.3 1.4 QUANTITY OF MONEY (Trillions of dollars) 1.5 MD 2014 MD 2013 No Intervention New MS Curve + With Intervention Suppose the Bank of Canada wants to keep 2014 interest rates at their 2013 level. (?)

The following graph shows an increase in the demand for money from 2013 (MD2013) to 2014 (MD2014) caused by an increase in the price level. 5.25% 5.50% The initial equilibrium interest rate in 2013 was 5.75% 6.00% 6.25% Now suppose the Bank of Canada chooses not to alter the money supply between 2013 and 2014. On the following graph, use the grey point (star symbol) to illustrate the equilibrium interest rate and quantity of money that would result from this lack of intervention. NOMINAL INTEREST RATE (Percent) 6.50 6.25 6.00 5.75 5.50 5.25 5.00 4.75 4.50 Money Supply 0.9 1.1 1.0 1.2 1.3 1.4 QUANTITY OF MONEY (Trillions of dollars) 1.5 MD 2014 MD 2013 No Intervention New MS Curve + With Intervention Suppose the Bank of Canada wants to keep 2014 interest rates at their 2013 level. (?)

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter20: Monetary Policy

Section: Chapter Questions

Problem 4SQP

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The following graph shows an increase in the demand for money from 2013 (MD2013) to 2014 (MD2014) caused by an increase in aggregate output. 5.00% 5.25% The initial equilibrium interest rate in 2013 was Suppose the Federal Reserve (the Fed) chooses not to alter the money supply between 2013 and 2014. On the following graph, use the grey point (star symbol) to indicate the equilibrium interest rate and quantity of money that would result from this lack of intervention. NOMINAL INTEREST RATE (Percent) 6.25 6.00 5.75 5.50 5.25 5.00 4.75 4.50 4.25 0.9 1.0 1.1 1.2 1.3 1.4 QUANTITY OF MONEY (Trillions of dollars) Because Money Supply 1.5 B MD MD 2013 Suppose the Fed wants to keep 2014 interest rates at their 2013 level. 2014 ☆ No Intervention New MS Curve With Intervention 5.50% 5.75% 6.00% ? A-rapidly increasing the money supply causes hyperinflati investment responds to changes in the interest rate markets prefer low inflation to stable interest rates On the previous graph, place the green…
The following graph shows an increase in the demand for money from 2023 (MD2023) to 2024 (MD2024) caused by an increase in the price level. The initial equilibrium interest rate in 2023 was Now suppose the Bank of Canada chooses not to alter the money supply between 2023 and 2024. On the following graph, use the grey point (star symbol) to illustrate the equilibrium interest rate and quantity of money that would result from this lack of intervention. NOMINAL INTEREST RATE (Percent) 6.75 6.50 6.25 6.00 5.75 5.50 5.25 5.00 4.75 Money Supply 0.9 1.0 1.1 1.2 1.3 1.4 QUANTITY OF MONEY (Trillions of dollars) 1.5 MD MD, 2024 2023 No Intervention New MS Curve With Intervention (?)
In the following table, fill in the column labeled Value of Money. Price Level (P) Value of Money (1/P) 0.80 1.00 1.33 2.00 Now consider the relationship between the quantity of money that people demand and the price level. The higher the price level, the required to complete transactions, and the money people will want to hold in the form of currency or demand deposits. Assume that the Federal Reserve initially fixes the quantity of money supplied at $2.5 billion. VALUE OF MONEY 2.00 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. 1.79 1.50 1.25 1.00 0.50 Quantity of Money Demanded (Billions of dollars) 2.0 D D 1 2.5 4.0 8.0 2 4 5 QUANTITY OF MONEY (Billions of dollars) According to your graph, the equilibrium value of money is MS, Money Demand therefore the equilibrium price level is Now, suppose that the Fed increases the…
The following graph represents the money market for some hypothetical economy. This economy is similar to the United States in the sense that it has a central bank called the Fed, but a major difference is that this economy is closed (and therefore does not have any interaction with other world economies). The money market is currently in equilibrium at an interest rate of 5% and a quantity of money equal to $0.4 trillion, designated on the graph by the grey star symbol. INTEREST RATE (Percent) 7.0 6.5 6.0 5.5 PRICE LEVEL 4.5 4.0 3.5 3.0 0 Money Demand 0.1 Money Supply 0.3 0.4 0.5 0.6 MONEY (Trillions of dollars) 0.2 0.7 0.8 New MS Curve Suppose the Fed announces that it is lowering its target interest rate by 25 basis points, or 0.25 percentage points. To do this, the Fed will use open- market operations to the money by the public. OUTPUT New Equilibrium Use the green line (triangle symbol) on the previous graph to illustrate the effects of this policy by placing the new money supply…
The following graph represents the money market for some hypothetical economy. This economy is similar to the United States in the sense that it has a central bank called the Fed, but a major difference is that this economy is closed (and therefore does not have any interaction with other world economies). The money market is currently in equilibrium at an interest rate of 2.5% and a quantity of money equal to $0.4 trillion, designated on the graph by the grey star symbol. Use the green line (triangle symbol) on the previous graph to illustrate the effects of this policy by placing the new money supply curve (MS) in the correct location. Place the black point (plus symbol) at the new equilibrium interest rate and quantity of money. Suppose the following graph shows the aggregate demand curve for this economy. The Fed's policy of targeting a lower interest rate will (increase/reduce) the cost of borrowing, causing residential and business investment spending to (increase/decrease) and…
The following graph represents the money market for some hypothetical economy. This economy is similar to the United States in the sense that it has a central bank called the Fed, but a major difference is that this economy is closed (and therefore does not have any interaction with other world economies). The money market is currently in equilibrium at an interest rate of 5% and a quantity of money equal to $0.4 trillion, designated on the graph by the grey star symbol. INTEREST RATE (Percent) 7.0 4.5 35 20 PRICE LEVEL Many Demand 0.1 Money Supply MONEY (Trio of dollar) 0.7 New MS Curve Suppose the Fed announces that it is raising its target interest rate by 25 basis points, or 0.25 percentage points. To do this, the Fed will use open- market operations to ✓money by the public. New Equrum Use the green line (triangle symbol) on the previous graph to illustrate the effects of this policy by placing the new money supply curve (MS) in the correct location. Place the black point (plus…
The following graph represents the money market for some hypothetical economy. This economy is similar to the United States in the sense that it has a central bank called the Fed, but a major difference is that this economy is closed (and therefore does not have any interaction with other world economies). The money market is currently in equilibrium at an interest rate of 6% and a quantity of money equal to $0.4 trillion, designated on the graph by the grey star symbol. INTEREST RATE (Percent) 15 7.0 8.5 2 5.0 45 New MS Curve Money Demand 4.0 9.1 0.2 Money Supply 0.7 0.8 03 04 0.5 MONEY (Trilions of dollars) New Equilibrium Suppose the Fed announces that it is lowering its target interest rate by 75 basis points, or 0.75 percentage points. To do this, the Fed will use open- market operations to money by ▼the public. the Use the green line (triangle symbol) on the previous graph to illustrate the effects of this policy by placing the new money supply curve (MS) in the correct location.…
The following graph represents the money market for some hypothetical economy. This economy is similar to the United States in the sense that it has a central bank called the Fed, but a major difference is that this economy is closed (and therefore does not have any interaction with other world economies). The money market is currently in equilibrium at an interest rate of 6% and a quantity of money equal to $0.4 trillion, designated on the graph by the grey star symbol. INTEREST RATE (Percent) 8.0 7.5 7.0 6.5 6.0 5.5 5.0 4.5 4.0 0 Money Demand 0.1 Money Supply 0.2 0.3 0.4 0.5 MONEY (Trillions of dollars) 0.6 0.7 + 0.8 New MS Curve New Equilibrium (?)
The following graph represents the money market for some hypothetical economy. This economy is similar to the United States in the sense that it has a central bank called the Fed, but a major difference is that this economy is closed (and therefore does not have any interaction with other world economies). The money market is currently in equilibrium at an interest rate of 3% and a quantity of money equal to $0.4 trillion, designated on the graph by the grey star symbol. INTEREST RATE (Percent) 5.0 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0 Money Demand 0.1 Money Supply 0.5 0.2 0.3 0.4 MONEY (Trillions of dollars) 0.6 0.7 0.8 New MS Curve New Equilibrium ? Suppose the Fed announces that it is raising its target interest rate by 75 basis points, or 0.75 percentage points. To do this, the Fed will use open- market operations to the money by the public. Use the green line (triangle symbol) on the previous graph to illustrate the effects of this policy by placing the new money supply curve (MS) in the…
The following graph represents the money market for some hypothetical economy. This economy is similar to the United States in the sense that it has a central bank called the Fed, but a major difference is that this economy is closed (and therefore does not have any interaction with other world economies). The money market is currently in equilibrium at an interest rate of 3% and a quantity of money equal to $0.4 trillion, designated on the graph by the grey star symbol. Suppose the Fed announces that it is raising its target interest rate by 75 basis points, or 0.75 percentage points. To do this, the Fed will use open-market operations to (increase/decrease) the (demand for/supply for) money by (buying bonds from/selling bonds to) the public. Use the green line (triangle symbol) on the previous graph to illustrate the effects of this policy by placing the new money supply curve (MS) in the correct location. Place the black point (plus symbol) at the new equilibrium interest rate…
The following graph represents the money market in a hypothetical economy. This economy has a central bank, but unlike in Canada, the economy is closed (that is, the economy does not interact with other economies in the world). The money market is currently in equilibrium at an interest rate of 2.5% and a quantity of money equal to $0.4 trillion, as indicated by the grey star. PRICE LEVEL INTEREST RATE (Percent) 4.5 4.0 3.5 1.5 1.0 0.5 0 Money Demand 0.1 Money Supply 0,2 0.3 0.4 0.5 MONEY (Trillions of dollars) 0.0 0.7 0.8 A New MS Curve OUTPUT + New Equilibrium Suppose the central bank announces that it is lowering its target interest rate by 75 basis points, or 0.75 percentage point. To do this, the central bank will use open-market operations to ▼ the money by Y the public. Use the green line (triangle symbol) on the previous graph to illustrate the effects of this policy by placing the new money-supply curve (MS) in the correct location. Place the black point (plus symbol) at the…
According to your graph, the equilibrium value of money is (0.25, 0.50, 0.75, 1.00) therefore the equilibrium price level is (1.00, 1.33, 2.00, 4.00). Now, suppose that the Fed reduces the money supply from the initial level of $4 billion to $2.5 billion. In order to reduce the money supply, the Fed can use open market operations to (sell bonds to – buy bonds from) the public. Use the purple line (diamond symbol) to plot the new money supply (MS2). Immediately after the Fed changes the money supply from its initial equilibrium level, the quantity of money supplied is (greater – less) than the quantity of money demanded at the initial equilibrium. This contraction in the money supply will (increase – reduce) people’s demand for goods and services. In the long run, since the economy’s ability to produce goods and services has not changed, the prices of goods and services will (rise – fall) and value of money will (rise – fall)