ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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In which situation does the value of money increase?
if either money |
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if either money demand or money supply shifts left |
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if money demand shifts right or money supply shifts left |
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if money demand shifts left or money supply shifts right |
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- The following table shows the quantity of money supplied and the quantity of money demanded for various interest rates. Interest Rate (Percent) Demand for Money (Billions of dollars) Supply of Money (Billions of dollars) 11 50 250 9 150 250 7 250 250 5 350 250 3 450 250 The following graph depicts the money supply curve in orange. On the graph, use the blue points (circle symbol) to graph the money demand, and the black point (plus symbol) to signify the initial equilibrium point in the market. Next, shift the money supply curve to show the affects of a $200 billion increase in the money supply. Then, plot the point corresponding to the new equilibrium point using the purple point (diamond symbol). 13 MS 12 11 10 INTEREST RATE (Percent) + 5 M 9 3 2 MS Money Demand Equilibrium Equilibrium,arrow_forwardSuppose 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 Supplyarrow_forwardWhich of the following is an example of representative money? Group of answer choices Gold Cowry shells Salt Teaarrow_forward
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- In the situation depicted above, an increase in the money supply from $100 billion to $150 billion will cause the equilibrium rate of interest to: Group of answer choices a)Decrease from 4 percent to 2 percent. b)Increase from 2 percent to 4 percent. c)Decrease from 6 percent to 2 percent. d)Increase from 4 percent to 6 percent. e)Decrease from 6 percent to 4 percent.arrow_forwardhow might this change in interest rates and the supply of money affect the value of money? What happens in the circular-flow-diagram if borrowing money becomes expensive for businesses and consumers? What happens to employment?arrow_forwardThe United States Federal Reserve has two mandates when setting monetary policy - keep annual inflation low (around 2-3%) and the unemployment rate low (around 5%). Typically, efforts to adjust the money supply to cause inflation to decrease causes unemployment to increase and vice versa. Now, imagine a situation where the United States faces high inflation and high unemployment (called stagflation, was issue in late 1970s). What do you think the Federal Reserve should do in this situation?arrow_forward
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