Consider the money market in the accompanying graph. Initially, the equilibrium interest rate and quantity are represented by the point, E1. Suppose the central bank reduces the money supply. Adjust the graph of the money market to illustrate this change and label the new equilibrium by moving the point, E2. After this recent change in the money supply, what is true about the point E1? The quantity of money demanded is more than the quantity of money supplied. The quantity of money demanded is less than the quantity of money supplied. The quantity of money supplied is more than the quantity of money demanded. Those selling interest-bearing nonmonetary assets will face market pressure to lower their interest rates. Interest rate (%) Incorrect 10 9 8 7 6 5 4 3 2 1 0 0 1 2 E2 Money Market EI 3 4 5 6 Quantity of money 7 8 MS MD 9 10

Suppose that changes in bank regulations expand the availability of credit cards so that people need to hold less cash. Show how this event affects the demand for money. Value of Money (1/P) Supply Quantity of Money Demand Demand 0 Supply

CS 21  Economics  please answer both a & b

Suppose the economy's price level is 2 and real GDP is 30 , 000 for the year. Suppose the money supply is 5 , 000. If the money market is in equilibrium, then how many times per year is the typical dollar bill used to pay for a newly produced good or service? 10  8 12 16

What happens to the interest rates on bonds during recessions. I am confused becaus During an economic downturn,income and wealth are falling and thus the demand for bonds fall at every price level– the demand curve shifts to the left. Does this decrease the price of bonds meaning higher interest rates? Or an alternartive explanation: In recessions the government tends to cut interest rates in order to stimulate economic activity by creating incentive for banks to lower their rates on loans to consumers and firms, encouraging consumption and investment. This can lead to the interest rates on assets falling. Bonds are often a safe haven during recessionary periods because they offer a fixed income stream in times of uncertainty, and thus they may be favoured to other types of assets invesmtents increasing demand for bonds. The increase in demand Increases price of bonds thus decreases interest rates. or in terms of supply: the supply of bonds may fall because there is less incentive to…

Is it possible that money supply can be more than the money demand (this means that we can have too much money)?

General Equilibrium is a situation in which all market in an economy are simultaneously in equilibrium (both the good market and the money market in equilibrium, as shown below). Now suppose the U.S. economy is now shown at the intersection of the IS and LM curves. Now President Joe Biden passed his Infrastructure bill. Please use graph to explain how such a bill may affect the economy in the long run and short run, in terms of price level, P, output Y and interest rate r. Please also add the AD-AS analysis with your argument.

(Q#4) Banks have become much less strict about issuing new credit cards. They are issuing far more cards, with lower rates and more generous credit limits. First predict how this will impact the demand for money balances. The expansion of credit cards will end up: [a] increasing the demand for money balances since more items will be purchased and more money will be needed to pay for them [b] reducing the demand for money balances as the delay of payment with them reduces the immediate need for money in a bank checking асcount

TOPIC: A possible break in the Note: everything you need will be in the picture

The Greek letter a represents a number that determines how much output responds to unexpected changes in the price level. In this case, assume that a = $2 billion. That is, when the actual price level exceeds the expected price level by 1, the quantity of output supplied will exceed the natural level of output by $2 billion. Suppose the natural level of output is $50 billion of real GDP and that people expect a price level of 95. On the following graph, use the purple line (diamond symbol) to plot this economy's long-run aggregate supply (LRAS) curve. Then use the orange line segments (square symbol) to plot the economy's short-run aggregate supply (AS) curve at each of the following price levels: 85, 90, 95, 100, and 105. PRICE LEVEL 125 120 115 110 105 100 95 90 85 80 75 0 + 10 20 ¶¶ 30 40 50 60 70 OUTPUT (Billions of dollars) + 80 90 100 -O AS LRAS (?) The short-run quantity of output supplied by firms will rise above the natural level of output when the actual price level falls…