Solutions? MD2 MD MDo 0 Real money (trillions of 2000 dollar 30) In the above su

Question

Solutions? MD2 MD MDo 0 Real money (trillions of 2000 dollar 30) In the above suppose What is the effect of a fall in the nominal interest rate? A) The demand for money curve would shift rightward to MD2. B) The demand for money curve would shift leftward to MDo. C) There would be a movement upward along the demand for money curve MD D) There would be a movement downward along the demand for money curve MD figure, suppose the economy is initially on the demand for money curve MD MD, MD MD Real money frillions of 2005 dollars) 31) Use the figure above to answer this question. Suppose the economy is operating at point a. A move to A) point e; a decrease in the nominal interest rate B) point c; an increase in the nominal interest rate C) point d; an increase in real GDP could be explained by

Explanation / Answer

30. Option D

The fall in the nominal interest rate will mean that the disposable income will increase which means that people will have more money to spend and hence, the aggregate demand of the economy will increase. The demand of money will go up.

The demand curve will move to the right side. So, there will be a movemnet downward along the demand of money curve MD1

31. Option C

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