0.75Money Demand0.50MS,0.25138QUANTITY OF MONEY (Billions of dollars)According to your graph, the equilibrium value of money istherefore the equilibrium price level isNow, suppose that the Fed increases the money supply from the initial level of $3.5 billion to $7 billion.In order to increase the money supply, the Fed can use open market operations tothe public.Use the purple line (diamond symbol) to plot the new money supply (MS2 ).than theImmediately after the Fed changes the money supply from its initial equilibrium level, the quantity of money supplied ispeople's demand for goods andquantity of money demanded at the initial equilibrium. This expansion in the money supply willandservices. In the long run, since the economy's ability to produce goods and services has not changed, the prices of goods and services willthe value of money willVALUE OF MONEY 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 DemandedPrice Level (P)Value of Money (1/P)(Billions of dollars)1.001.51.332.02.003.54.007.0Now consider the relationship between the price level and the quantity of money that people demand. The lower the price level, themoneythe typical transaction requires, and themoney 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 (MS1 ) set by the Fed. Then, referring to the previous table, use the blueconnected points (circle symbol) to graph the money demand curve.

The table given below shows the value of money at different price levels Price level Value of…

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 Price Level (P) Value of Money (1/P) (Billions of dollars) 1.00 1.5 1.33 2.0 2.00 3.5 4.00 7.0 Now consider the relationship between the price level and the quantity of money that people demand. The lower the price level, the v money the typical transaction requires, and the 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 (MS1 ) set by the Fed. Then, referring to the previous table, use the blue connected points (circle symbol) to graph the money demand curve.

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 Price Level (P) Value of Money (1/P) (Billions of dollars) 1.00 1.5 1.33 2.0 2.00 3.5 4.00 7.0 Now consider the relationship between the price level and the quantity of money that people demand. The lower the price level, the v money the typical transaction requires, and the 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 (MS1 ) set by the Fed. Then, referring to the previous table, use the blue connected points (circle symbol) to graph the money demand curve.

Macroeconomics

13th Edition

ISBN:9781337617390

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter8: Aggregate Demand And Aggregate Supply

Section: Chapter Questions

Problem 11QP

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The following table shows a money demand schedule, which is the quantity of money demanded at various price levels (PP). Fill in the Value of Money column in the following table. Price Level (P) Value of Money (1/P) Quantity of Money Demanded 1.00 1.5 1.33 2.0 2.00 3.5 4.00 7.0 Now consider the relationship between the price level and the quantity of money that people demand. The lower the price level, the (a. more, b. less) money the typical transaction requires, and the (a. more, b. less) 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 (MS1) set by the Fed. Then, referring to the previous table, use the blue connected points (circle symbol) to graph the money demand curve. (Graph in image) According to your graph, the equilibrium value of…
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