A39-The Money Market
Email address *
First name *
Your answer
Last name *
Your answer
Class period *
The money market consists of the demand for money and the supply of money
Transactions demand — the demand for money to make purchases of goods and services
Precautionary demand — the demand for money to serve as protection against an unexpected need
Speculative demand — the demand for money because it serves as a store of wealth
1. Suppose the Federal Reserve increases the money supply by buying Treasury securities.
(A) What happens to the interest rate? *
1 point
(B) What happens to the quantity of money demanded? *
1 point
(C) Explain what happens to loans and interest rates as the Fed increases the money supply. *
0 points
Your answer
2. Suppose the demand for money increases.
(A) What happens to the interest rate? *
1 point
(B) What happens to the quantity of money supplied? *
1 point
(C) If the Fed wants to maintain a constant interest rate when the demand for money increases, explain what policy the Fed needs to follow and why *
0 points
Your answer
(D) Why might the Fed want to maintain a constant interest rate (check all that apply)? *
1 point
Required
Refer to figure 39.2
3. Suppose there are two money demand curves — MD and MD1 — and the Fed increases the money supply from MS to MS 1 as shown in Figure 39.2.
(A) Compare what happens to the interest rate with each MD curve. *
Your answer
(B) Explain the effect of the change in the money supply on consumption, investment, real output and prices. Would there be a difference in the effects under the two different money demand curves? If so, explain *
Your answer
(C) How would you describe, in economic terms, the difference between the two money demand curves? *
Your answer
(D) If the Federal Reserve is trying to get the economy out of a recession, which money demand curve would it want to represent the economy? Explain. *
Your answer
Submit
Never submit passwords through Google Forms.
This content is neither created nor endorsed by Google. Report Abuse - Terms of Service