Handout 9.1: Interest Rates Interpret the following graph showing the potential changes in supply of money compared to the demand for money. The demand for money is represented by line MD and the initial supply of money is represented by line MS. Then answer the questions below. Change in IÇerest Rates Interest Rate MS1 MS MS2 Font 7 A B 4 MD .7 .8 .9 1 1.1 1.2 1.3 Quantity of money Find the new equilibrium points Use the graph to explain why changes in the supply of money affect the quantity of money demanded 3.
Handout 9.1: Interest Rates Interpret the following graph showing the potential changes in supply of money compared to the demand for money. The demand for money is represented by line MD and the initial supply of money is represented by line MS. Then answer the questions below. Change in IÇerest Rates Interest Rate MS1 MS MS2 Font 7 A B 4 MD .7 .8 .9 1 1.1 1.2 1.3 Quantity of money Find the new equilibrium points Use the graph to explain why changes in the supply of money affect the quantity of money demanded 3.
Chapter15: Monetary Theory And Policy
Section: Chapter Questions
Problem 1.2P
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Use the graph to explain why changes in the supply of money affect the quantity of money demanded.
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