courses.aplia.com Score: /2 9. The price level and the market for bank reservers

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courses.aplia.com Score: /2 9. The price level and the market for bank reservers The following graph shows the market for bank reserves in a hypothetical economy, Suppose the price level decreases from 90 to 60. Shift the appropriate curve on the following graph to show the impact of a decrease in the overall price level Demand Supply nd 10 20 30 40 5060 QUANTITY OF BANK RESERVES (Bilions of Dolars) Analyze the effects of this change in the price level, then fill in the following table with these results

Explanation / Answer

A decrease in price level leads to increase in spending and decrease in quantity of reserves in bank.

Also, the interest rate falls and there is a decrease in investment quantity demanded

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