6 Rate of interest Use the graph below to answer the following questions: D, is the transactions demand for money, Dis the total demand for money, and S is the supply of money. 1. What is the transactions demand for money in this market? Number 2. What is the asset demand for money if the interest rate is 4 %? Number 3. If the money market is in equilibrium at 6 %, what change in money supply must occur for the equilibrium rate to change to 4 % (include a negative if a decrease in money supply) Number 4. If the money market is in equilibrium at 8% and the money supply has increased to Sm3, by how much has total demand for money changed? Number 8 I ' Dt Sm1 Sm2 Sm3 Dm 0 120 170 220 Quantity of Money 270
6 Rate of interest Use the graph below to answer the following questions: D, is the transactions demand for money, Dis the total demand for money, and S is the supply of money. 1. What is the transactions demand for money in this market? Number 2. What is the asset demand for money if the interest rate is 4 %? Number 3. If the money market is in equilibrium at 6 %, what change in money supply must occur for the equilibrium rate to change to 4 % (include a negative if a decrease in money supply) Number 4. If the money market is in equilibrium at 8% and the money supply has increased to Sm3, by how much has total demand for money changed? Number 8 I ' Dt Sm1 Sm2 Sm3 Dm 0 120 170 220 Quantity of Money 270
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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