K The graph shows the money market. If the quantity of money is $1.0 trillion and real GDP increases, how will the interest rate change? Explain the process that changes the interest rate The figure shows the demand for money curve and the supply of money curve. Draw a new MD curve that shows the effect of an increase in real GDP. Label it MD,. Draw a point at the new equilibrium quantity of money and interest rate. The equilibrium interest rate before real GDP increases is percent a year. After real GDP increases, at an interest rate of 9 percent a year, people want to hold money so they bonds. OA. the same quantity of, buy some bonds and sell some B. more; buy OC. less; sell OD. less; buy OE. more; sell The price of a bond and the interest rate OA. does not change; does not change OB. falls; rises OC. rises; rises OD. rises; falls OE. falls, falls 13- 12- 11- 10- 9- 8- Nominal interest rate (percent per year) 5+ 0.8 MS MD 1.1 1.2 a E 1.0 0.9 Quantity of money (trillions of dollars) >>>> Draw only the objects specified in the question.

K The graph shows the money market. If the quantity of money is $1.0 trillion and real GDP increases, how will the interest rate change? Explain the process that changes the interest rate The figure shows the demand for money curve and the supply of money curve. Draw a new MD curve that shows the effect of an increase in real GDP. Label it MD,. Draw a point at the new equilibrium quantity of money and interest rate. The equilibrium interest rate before real GDP increases is percent a year. After real GDP increases, at an interest rate of 9 percent a year, people want to hold money so they bonds. OA. the same quantity of, buy some bonds and sell some B. more; buy OC. less; sell OD. less; buy OE. more; sell The price of a bond and the interest rate OA. does not change; does not change OB. falls; rises OC. rises; rises OD. rises; falls OE. falls, falls 13- 12- 11- 10- 9- 8- Nominal interest rate (percent per year) 5+ 0.8 MS MD 1.1 1.2 a E 1.0 0.9 Quantity of money (trillions of dollars) >>>> Draw only the objects specified in the question.

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter16: The Influence Of Monetary And Fiscal Policy On Aggregate Demand

Section: Chapter Questions

Problem 5PA

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The figure shows the demand for money curve in Epsilon. The Fed wants the interest rate to be 6 percent a year. If the interest rate is 5 percent a year, do people buy or sell bonds? Question Help Does the price of a bond rise or fall? Does the interest rate rise or fall? Interest rate (percent per year) 7- Draw the supply of money curve if the Fed wants the interest rate to be 6 percent a year. Label it. Draw a point at the equilibrium in the money market. 6- If the interest rate is 5 percent, people will bonds. 5- Bond prices and the interest rate will O A. fall; fall 4- B. rise; fall C. rise; rise MD O D. fall; rise 3+ 2.8 2.9 3.0 3.1 3.2 Real money (trillions of 2005 dollars) >>> Draw only the objects specified in the question. Click the graph, choose a tool in the palette and follow the instructions to create your graph. DII 888 F12 F10 F11 F7 F8 F9 F5 F6 esc F2 F4 F3 F1 & # ! delete %3D 4 5 6 7 8 1 P T Y Q W tab J K F A caps lock M C V shift option command command option fn…
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?
Explain how an increase in government expenditure can affect the goods market and moneymarket by taking the link between the two markets into account.
Both graphs show a demand for money curve. In the left graph, draw a point to show the quantity of money demanded when the interest rate is 5 percent. Show the effect of an increase in the nominal interest rate. Draw either an arrow along the curve showing the direction of change, or a new demand for money curve. In the right graph, draw a point to show the quantity of money demanded when the interest rate is 5 percent. Show the effect of an increase in real GDP. Draw either an arrow along the curve showing the direction of change, or a new demand for money curve. >>> Dra only the objects specified in the question. Interest rate (percent per year) 6.5- 6.0- 5.5- 5.0- 4.5- 4.0- MDO 3.5+ 2.7 2.8 2.9 3.0 3.1 3.2 3.3 Real money (trillions of 2009 dollars) Q 6.5 6.0- 5.5- 5.0- 4.5- 4.0- Interest rate (percent per year) MDO 3.5+ 2.7 2.8 2.9 3.0 3.1 3.2 3.3 Real money (trillions of 2009 dollars) Q
K The graph shows the demand for money curve. Draw a point to show the interest rate and quantity of money demanded when the interest rate is 5 percent a year. Draw an arrow to show the effect of an increase in the interest rate above 5 percent a year. Label it 1. Draw an arrow to show the effect of a decrease in the interest rate below 5 percent a year. Label it 2. When the interest rate rises, other things remaining the same, the opportunity cost of holding money and A. rises; the demand for money decreases B. falls; the demand for money increases O C. falls; the quantity of money demanded increases OD. rises; the quantity of money demanded decreases 8- 6- 4 2- 0+ Interest rate (percent per year) 2.7 MDO 2.9 3.1 3.3 Real money (trillions of 2007 dollars) >>> Draw only the objects specified in the question. 3.5 € G
11- 10- Nominal interest rate (percent per year) 94 8- 7- 6- 5- 4- 34 MD 2.8 2.9 3.0 3.1 Quantity of money (trillions of dollars) >>> Draw only the objects specified in the question. 3.2 Q 5 +
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 supply
The following table shows a money demand schedule, which is the quantity of money demanded at various price levels (P). Fill in the Value of Money column in the following table. Quantity of Money Demanded Price Level (P) Value of Money (1/P) (Billions of dollars) 1.00 1.5 1.33 2.0 2.00 3.5 4.00 7.0 Now consider the relationship between the price level and the quantity of money that people demand. The lower the price level, the money the typical transaction requires, and the money people will wish to hold in the form of currency or demand deposits. Assume that the Fed initially fixes the quantity of money supplied at $3.5 billion. 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.
According to your graph, the equilibrium value of money is , therefore the equilibrium price level is Now, suppose that the Fed reduces the money supply from the initial level of $3.5 billion to $2 billion. In order to reduce the money supply, the Fed can use open market operations to 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 than the quantity of money demanded at the initial equilibrium. This contraction in the money supply will 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 and the value of money will
The following table shows a money demand schedule, which is the quantity of money demanded at various price levels (P). Fill in the Value of Money column in the following table. Quantity of Money Demanded Price Level (P) Value of Money (1/P) (Billions of dollars) 1.00 2.0 1.33 2.5 2.00 4.0 4.00 8.0 Now consider the relationship between the price level and the quantity of money that people demand. The lower the price level, the money the typical transaction requires, and the money people will wish to hold in the form of currency or demand deposits. Assume that the Fed initially fixes the quantity of money supplied at $4 billion.
Suppose the money market for some hypothetical economy is given by the following graph, which plots the money demand and money supply curves. Assume the central bank in this economy (the Fed) foxes the quantity of money supplied. Suppose the price level increases from 90 to 105. Shift the appropriate curve on the graph to show the impact of an increase in the overall price level on the market for money. ? INTEREST RATE (Percent) 2 10 Money Supply Morey Demand 60 10 MONEY (Billions of dollars) 100 120 Money Demand The following graph plots the aggregate demand curve for this economy. BT Money Supply Following the price level increase, the quantity of money demanded at the initial interest rate of 6% will be supplied by the Fed at this interest rate. As a result, individuals will attempt to bonds and other interest-bearing assets, and bond issuers will realize that they is restored in the money market at an interest rate of [ than the quantity of money their money holdings. In order to…
The graph shows a demand for money curve. Draw a new demand for money curve that shows the effect of an increase in real GDP. Label it MD₁. Draw a demand for money curve that shows the effect of an increase in the number of families that have a credit card. Draw this demand for money curve in relation to the original demand for money curve, MD. Label the new curve MD2. 12- 10- 8- Nominal interest rate (percent per year) 6- 4- 2- 0 2 4 6 8 MD 10 12 ☑ Quantity of money (trillions of dollars) >>> Draw only the objects specified in the question.