Money supply, money demand, and adjustment to monetary equilibrium The following

Question

Money supply, money demand, and adjustment to monetary equilibrium The following table shows a money demand schedule, which is the quantity of money demanded at various price levels (P).

Fill in the Value of Money column in the following table Quantity of Money Demanded Billions of dollars) Price Level (P) 0.80 1.00 1.33 2.00 Value of Money (1/P) 2.0 3.5 7.0 Now consider the relationship between the price level and the quantity of money that people demand. The lower the price level, the the typical transaction requires, and the money money people will wish to hold in the form of currency or demand deposits Assume that the Fed initially fixes the quantity of money supplied at $3.5 billion Use the orange line (square symbol) to plot the initial money supply (MS,) set by the Fed. Then, referring to the previous table, use the blue connected points (circle symbol) to graph the money demand curve 2.00 1.75 MS 1.50 u 1.25 Money Demand 1.00 0.75 MS 0.50 0.25 0 4 5 6 8 QUANTITY OF MONEY (Billions of dollars) Session Timeout 39

Explanation / Answer

P Value of Money(1/P) Quantity of money demanded(Billions of Dollars) MS1 MS2 0.8 1.25 1.5 3.5 2 1 1 2 3.5 2 1.33 0.75188 3.5 3.5 2 2 0.5 7 3.5 2 less less 0.75188, 1.33 sell less reduce rise rise.

Related Questions

Navigate

• Browse (All)
• Browse M
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.