### Graph DescriptionThe graph illustrates the relationship between the value of money and the quantity of money. It features two vertical lines labeled MS₁ and MS₂ representing different levels of money supply. The horizontal axis denotes the quantity of money, while the vertical axis denotes the value of money.#### Key Points on the Graph:- **Money Demand Curve**: Downward sloping curve representing the demand for money.- **MS₁ and MS₂**: Vertical lines showing different money supply levels.- **Point A**: Intersection of MS₁ and the money demand curve at value of money = 2.- **Point B**: Intersection of MS₂ and the money demand curve at value of money = 2.- **Point C**: Intersection of MS₁ and the money demand curve at value of money = 1.- **Point D**: Intersection of MS₂ and the money demand curve at value of money = 1.### QuestionIf the money supply is MS₂ and the price level is 2, there is excess:- ⬜ demand equal to distance AC.- ⬜ supply equal to distance AC.- ⬜ demand equal to distance AB.- ⬜ supply equal to distance AB.- ⬜ None of the above is correct.

Among all assets, money is the most liquid. This kind of capital asset is the most fundamental. It…

Answered: If the money supply is MS2 and the…

If the money supply is MS2 and the price level is 2, there is excess demand equal to distance AC. supply equal to distance AC. demand equal to distance AB. supply equal to distance AB.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

### Graph Description

The graph illustrates the relationship between the value of money and the quantity of money. It features two vertical lines labeled MS₁ and MS₂ representing different levels of money supply. The horizontal axis denotes the quantity of money, while the vertical axis denotes the value of money.

#### Key Points on the Graph:
- **Money Demand Curve**: Downward sloping curve representing the demand for money.
- **MS₁ and MS₂**: Vertical lines showing different money supply levels.
- **Point A**: Intersection of MS₁ and the money demand curve at value of money = 2.
- **Point B**: Intersection of MS₂ and the money demand curve at value of money = 2.
- **Point C**: Intersection of MS₁ and the money demand curve at value of money = 1.
- **Point D**: Intersection of MS₂ and the money demand curve at value of money = 1.

### Question
If the money supply is MS₂ and the price level is 2, there is excess:

- ⬜ demand equal to distance AC.
- ⬜ supply equal to distance AC.
- ⬜ demand equal to distance AB.
- ⬜ supply equal to distance AB.
- ⬜ None of the above is correct.

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