The graph on the right depicts real money supply. 1.) Using the three-point curve drawing tool, draw the aggregate money demand curve in the diagram to the right. Label this line 'L(R,Y)¹. Now suppose that consumers' preferences change in such a way that they choose to carry more cash. 2.) On the same graph, using the three-point curve drawing tool, draw the new aggregate demand for money curve as a result of this change. Label this line 'L(R,Y)²¹. Carefully follow the instructions above and only draw the required objects. As a result of this change in preferences, equilibrium in the money market will be interest rate. Real money holdings will at a remain unchanged rise Interest rate, R MS Real money holdings

The graph on the right depicts real money supply. 1.) Using the three-point curve drawing tool, draw the aggregate money demand curve in the diagram to the right. Label this line 'L(R,Y)¹. Now suppose that consumers' preferences change in such a way that they choose to carry more cash. 2.) On the same graph, using the three-point curve drawing tool, draw the new aggregate demand for money curve as a result of this change. Label this line 'L(R,Y)²¹. Carefully follow the instructions above and only draw the required objects. As a result of this change in preferences, equilibrium in the money market will be interest rate. Real money holdings will at a remain unchanged rise Interest rate, R MS Real money holdings

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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please als do the graphs. thanksssssssss
I'm having an issue finalizing the interpretation of the graph. The Graph is correct. As a result of this change in preferences, equilibrium in the money market will be at a lower interest rate. Real money holdings will rise. Is that correct?
A3
FIGURE 1 MS P2 r2 P1 AD MD2 r1 MD1 REFER TO FIGURE 1. If the money-supply curve MS on the left-hand graph were to shift to the right, this would O create, until the interest rate adjusted, an excess demand for money at the interest rate that equilibrated the money market before the shift. All of the other answers are correct. O represent an action taken by the Federal Reserve. O shift the AD curve to the left.
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Use the graph to explain why changes in the supply of money affect the quantity of money demanded.