9. Changes in the demand for money and and monetary policy Suppose interest rates increased. Adjust the following graph to illustrate the described change. INTEREST RATE Money Supply QUANTITY OF MONEY MD₂ As a result of an increase in interest rates, the equilibrium interest rate does not change The level of foreign direct investment Central banks' holdings of the currency Foreign demand for a country's goods The discount rate MD₁ 1 Money Demand Money Supply rises (2. ? Which of the following factors may also be responsible for a shift in the money demand curve? Check all that apply. and the equilibrium quantity of money

9. Changes in the demand for money and and monetary policy Suppose interest rates increased. Adjust the following graph to illustrate the described change. INTEREST RATE Money Supply QUANTITY OF MONEY MD₂ As a result of an increase in interest rates, the equilibrium interest rate does not change The level of foreign direct investment Central banks' holdings of the currency Foreign demand for a country's goods The discount rate MD₁ 1 Money Demand Money Supply rises (2. ? Which of the following factors may also be responsible for a shift in the money demand curve? Check all that apply. and the equilibrium quantity of money

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

2. Equilibrium and disequilibrium in the money market The following diagram represents the money market in the United States, which is currently in equilibrium. INTEREST RATE (Percent) 6.0 5.5 5.0 4.5 4.0 3.5 3.0 2.5 2.0 0.6 0.7 Money supply 0.9 1.0 1.1 1.2 1.3 0.8 QUANTITY OF MONEY (Trillions of dollars) Money demand the Money demand Money supply ? Suppose the Federal Reserve announces that it is lowering its target interest rate by 75 basis points, or 0.75%. It would achieve this by Shift either the money supply curve or the money demand curve, or both, to illustrate on the graph the effects of this policy. 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, the quantity of interest-bearing financial assets such as bonds demanded , which means that bond issuers until the new equilibrium interest rate is achieved. sell the bonds. This process…
14
3. Changes in the money supply The following graph represents the money market for some hypothetical economy. This economy is similar to the United States in the sense that it has a central bank called the Fed, but a major difference is that this economy is closed (and therefore does not have any interaction with other world economies). The money market is currently in equilibrium at an interest rate of 2.5% and a quantity of money equal to $0.4 trillion, designated on the graph by the grey star symbol. INTEREST RATE (Percent) 4.5 4.0 6 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0 Money Demand + 0.1 Money Supply 0.3 0.5 0.6 MONEY (Trillions of dollars) 0.2 0.7 0.8 New MS Curve New Equilibrium ? Suppose the Fed announces that it is lowering its target interest rate by 75 basis points, or 0.75 percentage points. To do this, the Fed will use open- market operations to the money by the public. Use the green line (triangle symbol) on the previous graph to illustrate the effects of this policy by placing…
19
Figure 369-169 VALUE OF MONEY 5 2 MS. D B MS. A C Money Demand QUANTITY OF MONEY Refer to Figure 369-169. If the money supply is MS₂ and the value of money is 5, then the quantity of money demanded is greater than the quantity supplied; the price level will rise. demanded is greater than the quantity supplied; the price level will fall. supplied is greater than the quantity demanded; the price level will rise. supplied is greater than the quantity demanded; the price level will fall.
M11
State whether you agree or disagree with the following statement: Explain what happens to Money Demand and Interest Rates Inflation, a rise in the price level, causes the demand for money to decline. Because inflation causes money to be worth less households desire to hold less of it. Options to choose from = Disagree, Agree, Increase, Decrease, Remain Unchanged Agree or Disagree ________ Impact on Money Demand________ Impact on Interest Rate _________
None
find objective of policy & Monetary policy
30. . If the Fed reduces the money supply to reduce inflation: the interest rate will increase, and the price of US exports will fall and the price of US imports will rise. the interest rate will increase, and the price of US exports will rise and the price of US imports will fall. the interest rate will increase, and the price of both US exports and US imports will rise. 4. the interest rate will increase, and the price of both US exports and US imports will fall.
Figure 21. The graph on the left shows a money market with the interest rate on the vertical axis and the quantity of money on the horizontal axis. The graph on the right is related to the money market graph and shows an aggregate demand (AD) with the price level on the vertical axis and quantity of output on the horizontal axis "2 "1 MS MD2 MD₁ 1 P₂ P₁ AD 1₂ ₁ Refer to Figure 21. The changes on the two graphs are related. Which of the following is a correct explanation of the movement of the economy from point Y1 to point Y2. The Federal Reserve's expansionary monetary policy shifts the demand for money from MD1 to MD2. The resulting increase in the interest rate causes Y to decrease from Y1 to Y2. The rise of the price level from P1 to P2 leads to an increase in the demand for money represented by the rightward shift of the money demand curve from MD1 to MD2. The resulting rise of the interest rate causes Y to decrease from Y1 to Y2. A fall in the price level from P2 to P1 causes an…
Since October 2008, the Federal Reserve has started paying interest on excess reserves held by banks. Under these circumstances, if the Fed buys a Treasury security worth $200 million from a bank, which of the following can be expected regarding the change in the money supply? Assume that the required reserve ratio is 10% and that all currency is deposited into the banking system. -The money supply will increase by less than $2 billion. -The money supply will not change at all. -The money supply will increase by $2 billion. -The money supply will increase by more than $2 billion.