The following graph shows the money market in a hypothetical economy. The central bank in this economy is called the Fed. Assume that the Fed fixes the quantity of money supplied. Suppose the price level increases from 90 to 105. Shift the appropriate curve on the graph to show the impact of an increase in the overall price level on the market for money. 12 Money Supply 10 Money Demand Money Supply Money Demand 20 40 60 80 100 120 MONEY (Billions of dollars) After the increase in the price level, the quantity of money demanded at the initial interest rate of 6% will be than the quantity of money supplied by the Fed at this interest rate. People will try to their money holdings. In order to do so, people willv bonds and other interest-bearing assets, and bond issuers will find that they interest rates until the money market reaches its new equilibrium at an interest rate of INTEREST RATE (Percent)

The following graph shows the money market in a hypothetical economy. The central bank in this economy is called the Fed. Assume that the Fed fixes the quantity of money supplied. Suppose the price level increases from 90 to 105. Shift the appropriate curve on the graph to show the impact of an increase in the overall price level on the market for money. 12 Money Supply 10 Money Demand Money Supply Money Demand 20 40 60 80 100 120 MONEY (Billions of dollars) After the increase in the price level, the quantity of money demanded at the initial interest rate of 6% will be than the quantity of money supplied by the Fed at this interest rate. People will try to their money holdings. In order to do so, people willv bonds and other interest-bearing assets, and bond issuers will find that they interest rates until the money market reaches its new equilibrium at an interest rate of INTEREST RATE (Percent)

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

The question isn't incomplete

The following graph shows the money market in a hypothetical economy. The central bank in this economy is called the Fed. Assume that the Fed fixes
the quantity of money supplied.
Suppose the price level increases from 90 to 105.
Shift the appropriate curve on the graph to show the impact of an increase in the overall price level on the market for money.
12
Money Supply
10
Money Demand
O
Money Supply
4
Money Demand
2
20
40
60
80
100
120
MONEY (Billions of dollars)
After the increase in the price level, the quantity of money demanded at the initial interest rate of 6% will be
than the quantity of money
supplied by the Fed at this interest rate. People will try to
their money holdings. In order to do so, people will
bonds and other
interest-bearing assets, and bond issuers will find that they
interest rates until the money market reaches its new
equilibrium at an interest rate of
%
INTEREST RATE (Percent)

The following graph shows the economy's aggregate demand curve.
Show the impact of the increase in the price level by moving the point along the curve or shifting the curve.
180
150
Aggregate Demand
120
90
60
Aggregate Demand
30
40
80
120
160
200
240
OUTPUT (Billions of dollars)
The change in the interest rate that you found previously will cause residential and business investment spending to
leading to
in the quantity of output demanded in the economy.
PRICE LEVEL

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