Figure 30-3. On the graph, MS represents the money supply and MD represents money demand. The usual quantities aremeasured along the axes.MS₁ MS₂NI10,000 15,0000.50.33MDRefer to Figure 30-3. If the relevant money-supply curve is the one labeled MS 2, thena. when the money market is in equilibrium, one dollar purchases about one-third of a basket of goods and services.Ob. when the money market is in equilibrium, one unit of goods and services sells for 33 cents.Oc. there is an excess demand for money if the value of money in terms of goods and services is 0.5.Od. All of the above are correct.

We have given a graph shows the money demand and money supply and determines the money market…

Answered: Figure 30-3. On the graph, MS…

Figure 30-3. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are measured along the axes.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Required Reserve and Excess Reserve Analysis

A required reserve is an amount of cash that banks must keep with themselves, which is certain percentage of the deposits made by their customers. Required reserve is a percentage of the bank's deposits that the respective bank must have on each overnight. The percentage rate is set and determined by the nation’s central bank. It is important to have such funds accumulated to meet its uncertain obligations, sudden liabilities and withdrawals. Required reserve is also known as reserve ratio. Reserve ratio is an important tool to control the money supply.

Question

Figure 30-3. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are
measured along the axes.
MS₁ MS₂
NI
10,000 15,000
0.5
0.33
MD
Refer to Figure 30-3. If the relevant money-supply curve is the one labeled MS 2, then
a. when the money market is in equilibrium, one dollar purchases about one-third of a basket of goods and services.
Ob. when the money market is in equilibrium, one unit of goods and services sells for 33 cents.
Oc. there is an excess demand for money if the value of money in terms of goods and services is 0.5.
Od. All of the above are correct.

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