When the money market is drawn with the value of money on the vertical axis, if

Question

When the money market is drawn with the value of money on the vertical axis, if the money supply rises: a. the price level and the value of money fall. b. the price level and the value of money rise. c. the price level falls and the value of money rises. d. the price level rises and the value of money falls. 2. Suppose there is a surplus in the money market. a. This could have been created by an increase in the money supply. The value of money will rise. b. This could have been created by an increase in the money supply. The value of money will fall. c. This could have been created by a decrease in the money supply. The value of money will rise. d. This could have been created by a decrease in the money supply. The value of money will fall. 3. Refer to Figure 30-1. When the money supply curve shifts from MS_2 to MS_1, a. the demand for goods and services will decrease. b. the equilibrium value of money increases. c. the supply of money has increased. d. the equilibrium value of money decreases

Explanation / Answer

(1) (d) When the money market is drawn with the value of money on the vertical axis, an increase in the money supply: increases the price level and decreases the value of money.

(2) (b) Suppose there is a surplus in the money market: This could have been created by an increase in the money supply. The value of money will fall

(3) (b) When the money supply curve shifts from MS1 to MS2, the graph shows that: the equilibrium price level increases.

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