The following graph shows an increase in the demand for money from 2013 (MD2013) to 2014 (MD2014) caused by an increase in the price level. 5.25% 5.50% The initial equilibrium interest rate in 2013 was 5.75% 6.00% 6.25% Now suppose the Bank of Canada chooses not to alter the money supply between 2013 and 2014. On the following graph, use the grey point (star symbol) to illustrate the equilibrium interest rate and quantity of money that would result from this lack of intervention. NOMINAL INTEREST RATE (Percent) 6.50 6.25 6.00 5.75 5.50 5.25 5.00 4.75 4.50 Money Supply 0.9 1.1 1.0 1.2 1.3 1.4 QUANTITY OF MONEY (Trillions of dollars) 1.5 MD 2014 MD 2013 No Intervention New MS Curve + With Intervention Suppose the Bank of Canada wants to keep 2014 interest rates at their 2013 level. (?)

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please also do the graphs thankyouuuu

4.75
4.50
1.0
1.1
1.2
1.3
1.4
QUANTITY OF MONEY (Trillions of dollars)
0.9
1.5
MD 2013
Suppose the Bank of Canada wants to keep 2014 interest rates at their 2013 level.
On the previous graph, place the green line (triangle symbol) to indicate the new money supply curve if the Bank of Canada follows this policy. Then
use the black point (plus symbol) to indicate the equilibrium interest rate and quantity of money in this case.
investment responds to changes in the interest rate
In part because
rapidly increasing the money supply causes hyperinflation
markets prefer low inflation to stable interest rates
rate of growth in the money supply
specific level of M2
tevel of M1
interest rate
, most central banks set monetary policy aimed at targeting a
Transcribed Image Text:4.75 4.50 1.0 1.1 1.2 1.3 1.4 QUANTITY OF MONEY (Trillions of dollars) 0.9 1.5 MD 2013 Suppose the Bank of Canada wants to keep 2014 interest rates at their 2013 level. On the previous graph, place the green line (triangle symbol) to indicate the new money supply curve if the Bank of Canada follows this policy. Then use the black point (plus symbol) to indicate the equilibrium interest rate and quantity of money in this case. investment responds to changes in the interest rate In part because rapidly increasing the money supply causes hyperinflation markets prefer low inflation to stable interest rates rate of growth in the money supply specific level of M2 tevel of M1 interest rate , most central banks set monetary policy aimed at targeting a
The following graph shows an increase in the demand for money from 2013 (MD2013) to 2014 (MD2014) caused by an increase in the price level.
5.25%
5.50%
The initial equilibrium interest rate in 2013 was 5.75%
6.00%
6.25%
Now suppose the Bank of Canada chooses not to alter the money supply between 2013 and 2014.
On the following graph, use the grey point (star symbol) to illustrate the equilibrium interest rate and quantity of money that would result from this
lack of intervention.
NOMINAL INTEREST RATE (Percent)
6.50
6.25
6.00
5.75
5.50
5.25
5.00
4.75
4.50
0.9
Money Supply
1.0
1.1
1.2
1.3
1.4
QUANTITY OF MONEY (Trillions of dollars)
1.5
MD 2014
MD 2013
No Intervention
New MS Curve
+
With Intervention
Suppose the Bank of Canada wants to keep 2014 interest rates at their 2013 level.
Transcribed Image Text:The following graph shows an increase in the demand for money from 2013 (MD2013) to 2014 (MD2014) caused by an increase in the price level. 5.25% 5.50% The initial equilibrium interest rate in 2013 was 5.75% 6.00% 6.25% Now suppose the Bank of Canada chooses not to alter the money supply between 2013 and 2014. On the following graph, use the grey point (star symbol) to illustrate the equilibrium interest rate and quantity of money that would result from this lack of intervention. NOMINAL INTEREST RATE (Percent) 6.50 6.25 6.00 5.75 5.50 5.25 5.00 4.75 4.50 0.9 Money Supply 1.0 1.1 1.2 1.3 1.4 QUANTITY OF MONEY (Trillions of dollars) 1.5 MD 2014 MD 2013 No Intervention New MS Curve + With Intervention Suppose the Bank of Canada wants to keep 2014 interest rates at their 2013 level.
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