Krugman's Economics For The Ap® Course
3rd Edition
ISBN: 9781319113278
Author: David Anderson, Margaret Ray
Publisher: Worth Publishers
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Question
Chapter 5R, Problem 21MCQ
To determine
The correct option that defines the money supply curve.
Expert Solution & Answer
Answer to Problem 21MCQ
Option b is correct.
Explanation of Solution
Explanation for the correct option:
b.
The money supply depends on the limit set by the Federal Reserve which is irrespective of the money value. The money supply curve is vertical. It is shown as follows:
As per the above graph, the quantity of money supplied remains constant irrespective of changes in interest rates. Therefore, option b is correct.
Explanation for incorrect options:
a.
The money supply curve is vertical as its quantity supply is set by Fed. Therefore, option a is incorrect.
c.
The money supply curve is not horizontal as the limit is set by Fed where quantity is fixed even when there is a change in interest rates. Therefore, option c is incorrect.
d.
The
e.
The money supply curve is vertical rather than U-shaped. Therefore, option e is incorrect.
Economics Concept Introduction
Money supply curve: The money supply curve refers to the curve that depicts the relationship between money supplied and the interest rate that prevails in the market.
Chapter 5R Solutions
Krugman's Economics For The Ap® Course
Ch. 5R - Prob. 1MCQCh. 5R - Prob. 2MCQCh. 5R - Prob. 3MCQCh. 5R - Prob. 4MCQCh. 5R - Prob. 5MCQCh. 5R - Prob. 6MCQCh. 5R - Prob. 7MCQCh. 5R - Prob. 8MCQCh. 5R - Prob. 9MCQCh. 5R - Prob. 10MCQ
Ch. 5R - Prob. 11MCQCh. 5R - Prob. 12MCQCh. 5R - Prob. 13MCQCh. 5R - Prob. 14MCQCh. 5R - Prob. 15MCQCh. 5R - Prob. 16MCQCh. 5R - Prob. 17MCQCh. 5R - Prob. 18MCQCh. 5R - Prob. 19MCQCh. 5R - Prob. 20MCQCh. 5R - Prob. 21MCQCh. 5R - Prob. 22MCQCh. 5R - Prob. 23MCQCh. 5R - Prob. 24MCQCh. 5R - Prob. 25MCQCh. 5R - Prob. 1FRQCh. 5R - Prob. 2FRQCh. 5R - Prob. 3FRQCh. 5R - Prob. 1CTQCh. 5R - Prob. 2CTQCh. 5R - Prob. 3CTQCh. 5R - Prob. 4CTQ
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