Question 12 Figure 35-3 INTEREST RATE (a) The Money Market (b) The Aggregate Demand Curve N5 QUANTITY OF MONEY Ö MO. PRICE LEVEL aa QUANTITY OF OUTPUT AD Refer to Figure 35-3. Which of the following sequences (numbered arrows) shows the logic of the interest-rate effect on the slope of aggregate demand? O 1,2,3,4 O 1,4,3,2 O 3, 4, 2, 1 O3, 2, 1, 4 1 pts

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2. Suppose that the money market can be depicted in the graph below. Interest rate (M/P)² (M³/P)⁰ (M³/P)1 H A K O B C O E L3 L1 L2 Quantity of Money LI is the original demand for money by the public and (M/P) is the real money supply. Assume tha the price level does not change. The original equilibrium is at point O. Suppose that the government lowered income taxes so that consumers had more disposable income. Briefly describe how you reached that conclusion. Identify the new equilibrium point and what happens to interest rates

Suppose banks require a real interest rate of 6 percent. If they expect inflation to be 3 percent, what is the nominal interest rate? Multiple Choice O 9 percent O 3 percent 18 percent 2 percent $ % alo5 54 #3 72 M E R & 28 7 田 8 #8 6 T Y U 1 t

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Solve these 2 practice problems. Info for the 1.

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Other things equal, a decrease in the Z factors the equilibrium interest rate and equilibrium output. Select one: O a. increases; increases O b. increases; decreases Oc decreases; decreases O d. decreases; increases

If the U.S. interest rate increases, there's a(n) in the supply of dollars and a(n) _in the demand for dollars. O a. increases; decreases O b. decreases; increases O c. decreases; decreases O d. increases; increases Oe. no effect; no effect

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