3/25/22, 8:55 PMAssignment Print Viewc. When the total money supply decreases, there will be an adjustment to the interest rate in themoney market. Use the money market graph and show the change in the money supply and interestrates in the money market.Instructions: Use the tool provided "Ms,1" to draw a new money supply curve. Plot only the endpointsof the line (2 points total). Use the tool provided "New Equilibrium" to plot a new equilibrium interestrate.Money Market16ToolsM.14Ms,1New Equilibriu12108Mp450 100 150 200 250 300 350 400 450 500Money (billions of dollars)d. When the Federal Reserve raises the federal funds rate target, reserves decreasecausing the money supply to decreaseand interest rates (for borrowing and lendingmoney) will riseReferencesLearning Objective: Explain how theFederal Reserve uses open marketoperations to change the targeted level forthe federal funds rate and influenceinterest rates in the economy.GraphingDifficulty: 3 Hardhttps://ezto.mheducation.com/hm.tpx?todo=c15SinglePrintView&singleQuestionNo=5.&postSubmissionView=13252717711493253&wid=13252718466136846&rol...2/2Interest Rate (percent) 3/25/22, 8:55 PMAssignment Print View5.Suppose the reserve requirement is 20% and that the initial federal funds rate target is 5%. Thefederal funds market and the money market are in equilibrium as shown in the graphs below.a. Suppose the Federal Reserve wants to raise the federal funds rate from 5% to 7%. It will require a$30 billion open market sale to achieve this goal. Show the change in the supply of reserves curveand indicate the new quantity of reserves in the federal funds market.Instructions: Use the tool provided "Sf.1" to draw a new supply of reserves curve. Plot only theendpoints of the line (2 points total). Use the tool provided "New Quantity" to plot the new equilibriumquantity of reserves in the federal funds market.Federal Funds Market11Tools109.Sff,1New Quantity74115 30 45 60 75 90 105 120 135 150Quantity of Reserves (billions of dollars)b. If the Federal Reserve makes an open market purchase of $30 billion, the total money supply willdecrease by $|billion.https://ezto.mheducation.com/hm.tpx?todo=c15SinglePrintView&singleQuestionNo=5.&postSubmissionView=13252717711493253&wid=13252718466136846&rol...1/2Federal Funds Rate (percent)3.

Sff1 - New supply of federal fund. Sff - supply of federal fund

8:55 PM Assignment Print View c. When the total money supply decreases, there will be an adjustment to the interest rate in the money market. Use the money market graph and show the change in the money supply and interest rates in the money market. Instructions: Use the tool provided "Ms,1" to draw a new money supply curve. Plot only the endpoints of the line (2 points total). Use the tool provided "New Equilibrium" to plot a new equilibrium interest rate. Money Market 16 Tools 14 E --O

8:55 PM Assignment Print View c. When the total money supply decreases, there will be an adjustment to the interest rate in the money market. Use the money market graph and show the change in the money supply and interest rates in the money market. Instructions: Use the tool provided "Ms,1" to draw a new money supply curve. Plot only the endpoints of the line (2 points total). Use the tool provided "New Equilibrium" to plot a new equilibrium interest rate. Money Market 16 Tools 14 E --O

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Figure 1: MS Interest Rate (%) 5% MD 150 Money (S million) 21. Refer to Figure 1. At an interest rate of 4%, there is a: a) excess demand for money and the interest rate will decline. b) excess demand for money and the interest rate will rise. c) excess supply of money and the interest rate will decline. d) excess supply of money and the interest rate will rise.
Figure 1, Money Supply and Money Demand Money Supply. MS, Money Supply. MS Value of money, 1/P 1/P1 1/P2 MD Quantity of Money, M (billions of dollars) S900 S950 Ceteris paribus, if the Fed increases the money supply from MS1 to MS2, as indicated in the diagram above, it follows that, in the short run, there will be pressure on the price level, and pressure on nominal interest rates. Select one: O a. upward; upward O b. downward; upward O c. upward, downward O d. downward; downward
6. Targeting the money supply or interest rates The following graph shows an increase in the demand for money from 2020 (MD2020 to 2021 ( MD202) caused by an increase in aggregate output. The initial equilibrium interest rate in 2020 was Suppose the Federal Reserve (the Fed) chooses not to alter the money supply between 2020 and 2021. On the following graph, use the grey point (star symbol) to indicate the equilibrium interest rate and quantity of money that would result from this lack of intervention. NOMINAL INTEREST RATE (Percent) 6.50 Money Supply 6.25 6.00 5.75 5.50 5.25 5.00 4.75 4.50 0.9 1.0 1.1 1.2 1.3 14 1.5 QUANTITY OF MONEY (Trillions of dollars) MD 2021 MD 2020 No Intervention New MS Curve + With Intervention Suppose the Fed wants to keep 2021 interest rates at their 2020 level. On the previous graph, place the green line (triangle symbols) to indicate the new money supply curve if the Fed follows this policy. Then use the black point (plus symbol) to indicate the…
INTEREST RATE (Percent) 3 6 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) fixes the quantity of money supplied. Suppose the price level decreases from 90 to 75. Shift the appropriate curve on the graph to show the impact of a decrease in the overall price level on the market for money. 18 Money Supply 15 12 0 0 10 20 30 Money Demand 40 50 60 MONEY (Billions of dollars) Money Demand Money Supply Ⓡ
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3. Changes in the money supply The following graph represents the money market in a hypothetical economy. As in the United States, this economy has a central bank called the Fed, but unlike in the United States, the economy is closed (that is, the economy does not interact with other economies in the world). The money market is currently in equilibrium at an interest rate of 4% and a quantity of money equal to $0.4 trillion, as indicated by the grey star. (? 6.0 A New MS Curve Money Demand 5.0 4.5 New Equilibrium 4.0 3.6 3.0 2.5 Money Supply 2.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 MONEY (Trillions of dollars) Suppose the Fed announces that it is lowering its target interest rate by 75 basis points, or 0.75 percentage point. To do this, the Fed will use open- market operations to v the v money by v the public. Use the green line (triangle symbol) on the previous graph to illustrate the effects of this policy by placing the new money supply curve (MS) in the correct location. Place the black…
3. The effect of changes in the money supply The following diagram represents the money market in the United States, which is currently in equilibrium, as indicated by the grey star. INTEREST RATE (Percent) 6.0 5.5 Money Demand 5.0 4.5 4.0 3.5 3.0 2.5 20+ 0.6 07 Money Supply 0.9 1.0 1.1 0.8 1.2 QUANTITY OF MONEY (Trillions of dollars) 1.3 New Curve New Equilibrium (?) Suppose the Federal Reserve (the Fed) announces that it is raising its target interest rate by 50 basis points, or 0.50%. It would achieve this by Use the green line (triangle symbols) on the preceding graph to illustrate the effects of this policy. Place the a the black point (plus symbol) on the graph to indicate the new equilibrium interest rate and quantity of money. The sequence of events that results in a new equilibrium interest rate, after the Fed makes the change you selected, may be described as follows: Because there is money in the financial system, there is an excess money at the initial equilibrium interest…
TOPIC: Equilibrium in the money market NOTE: Everything you need will be in the picture. Thank you
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The FED has recently decided to reverse the massive buildup of its holding of Treasury and mortgage bonds. Thus, they began to sell these Treasury securities in the financial markets to remove liquidity from them and reduce the supply of money and credit in the economy. This will create a shortage in the money market.
#27 You saved $900 in currency in your piggy bank to purchase a new iPhone. The $900 you kept in your piggy bank illustrates money’s function as a _______. The iPhone’s price is posted as $900. The $900 price illustrates money’s function as a _____. You use the $900 to purchase the iPhone. This transaction illustrates money’s function as a ______. a medium of exchange, unit of account, store of value b medium of exchange, store of value, unit of account c store of value, medium of exchange, unit of account d store of value, unit of account, medium of exchange
(Figure: A Money Market) The accompanying figure Equilibrium in the Money Market shows the money market in equilibrium at an interest rate of r2. Holding the money supply constant, which of the following might cause the interest rate in the market to decrease to r1? A) The inflation rate falls to historically low levels. B) Higher payroll taxes cause employers to pay workers cash under the table. C) There is a significant increase in the stock market. D) A recession decreases real GDP.