Refer to the graph. If the initial equilibrium interest rate was 5 percent and the money supply increased by $50 billion, then the new interest rate would be Interest Rate 6 5 2 B 0 $50 100 150 200 250 300 Amount of Money Demanded ($B) Multiple Choice the same 5 percent. 3 percent. 2 percent. E 4 percent. 1 percent.
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- Interest rate 2% 4 6 8 C) 6 percent. D) 8 percent. 10 Transaction demand for money $220 220 220 220 220 Asset demand for money $300 280 260 240 220 1. Refer to the above table. The equilibrium interest rate is: B) 4 percent. Money supply $460 460 460 460 460 A) 2 percent.In the graph you've just explored, is the money market in equilibrium if the interest rate is 4 percent per year? _______. The quantity of money demanded is _______ trillion and the quantity of money supplied is _______ trillion, so there is _______. A. Yes; $10; $10; an equilibrium B. No; $11; $9; an excess demand of $2 trillion C. No; $9; $11; an excess supply of $2 trillion1. Suppose that the economy has the following money supply and demand equations: Money Supply: M = 8000Money Demand: M= 10,000 – 40,000rwhere money is in billions of dollars and interest rates, r , is written as a decimal(e.g., an interest rate of 10% would be written as .1 in the equation).A. Determine the equilibrium interest rate and quantity of money.B. What will happen in the money market if the interest rate is currently 10%?What is the amount of excess supply of or excess demand for money?C. Show in graph that at this interest rate (10%) there is disequilibrium in themoney market.
- Q.1.6 Which of the following will cause the demand curve for money to shift to theright?(a) An increase in real Gross Domestic Product (GDP).(b) A decrease in the repo rate.(c) An increase in the quantity of money available.(d) A decrease in the quantity of money available.Q.1.7 A budget deficit occurs when: (a) there is an increase in taxation.(b) government spends less than is generated by taxation.(c) government spending is very high.(d) Government spends more than is generated by taxation.Suppose that the Bank of Canada engages in monetary tightening, raising its Overnight Rate Target from 0.25 to 4 percent, so as to ‘build back better.’ (a) Why would no commercial bank borrow at a rate above the Bank Rate on theovernight market? (b) Why would no commercial bank lend at a rate below 3.75 percent on the overnightmarket?Explain why it is not possible for growing economies to have price stability whenthe money supply is constant
- Which of the following about saving deposits a-under M2 supply, they they are bank accounts that you cannot white a check from directly. generally moneyl to be kept asided. you can easily withdraw money cash from these aacounts at an automatic teller machine or back d- included in M1 money supply these are the monies held in checking accounts. they are called demand deposits or chekable deposits because the bank must give the deposit holder his money on demand when a check is written or a debit card is used c- included in M1 money supply therefore, very lliquid these are coins and bills that vcirvulate in an economy that are NOT held by the US treasury Federal reserve bank, or in any bank vaults so the cash you havae in your wallet pocket right now d- under M2 money sypplly funds that you invest in where the deposits of many investors are pooled together and invested in a safe way such as short term goverment bods.Use the figure below to answer the following question(s): Rate of Interest (%) O OG OC OH Sm3 OD 00 Smi 10 Sm2 D Q3 Q₁ Q₂ Quantity of Money -Dmz -Dm1 Refer to the above graph which shows the supply and demand for money where Dm1, Dm2, and Dm3 represent different demands for money and Sm1, Sm2, and Sm3 represent different levels of the money supply. The initial equilibrium point is A. What will be the new equilibrium point following an increase in the money supply? -Dm3 Jhay GWhich of the following statements is true? Select one OA Ahigher level of income causes the demand for money at each interest rate to increase and the demand curve to shift to the left As the interest rate on bonds increases, the opportunity cost of holding money decreases. Oc the market for money is in equilbrium, then the bond market is in disequilibrum OD. A one-ime increase in the money supply will cause prices to rise and the interest rate will rise consequenity
- Suppose that the economy has the following money supply and demand equations: Money Supply: M = 8000Money Demand: M= 10,000 – 40,000rwhere money is in billions of dollars and interest rates, r , is written as a decimal(e.g., an interest rate of 10% would be written as .1 in the equation).A. Determine the equilibrium interest rate and quantity of money.B. What will happen in the money market if the interest rate is currently 10%?Suppose that the economy has the following money supply and demand equations: Money Supply: M = 8000Money Demand: M= 10,000 – 40,000rwhere money is in billions of dollars and interest rates, r , is written as a decimal(e.g., an interest rate of 10% would be written as .1 in the equation).A. Determine the equilibrium interest rate and quantity of money.B. What will happen in the money market if the interest rate is currently 10%?What is the amount of excess supply of or excess demand for money?C. Show in graph that at this interest rate (10%) there is disequilibrium in themoney market.2. Assume that a particular bank has excess reserves of Php800,000 and checkabledeposits of Php1,500,000. If the reserve ratio is 20%, what is the size of the bank’sactual reserves?3. Suppose that GRAB Bank is a newly created bank in your hometown. Consider thefollowing transactions: Owners of the bank sold shares of stocks to the public (which includes owners’equity) amounting to P1,000,000. To fully…QUESTION 8 expenditures, income 120 110 100 28888888 QUESTION 9 90 80 70 60 50 40 30 20 10 0 ▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬ 08. Which of the following could have caused a shift of the Aggregate Expenditures curve from AE1 to AE2? O (a) an increase in the price level (b) an increase in the rate of interest O (c) an improvement in consumer confidence O (d) a contractionary monetary policy 0 10 20 30 40 50 60 70 80 90 100 110 120 income: Q 2006 NATIONAL INCOME DATA (billions of dollars) Personal consumption expenditures Gross private domestic investment Exports Imports 9277.2 2701.0 1470.2 2256.6 Government consumption expenditures and gross investment Capital consumption allowances (depreciation) 953.3 Survey of Current Business, National Income and Product Accounts, Tables 1.1.5 & 7.13 09. The Net Domestic Product is: O(a) 19282.1 O (b) 17025.5 O (c) 16072.2 (d) 13815.6 O(e) 12862.3 AE2 AE 1 2623.8