Macro Chapter 9

Your money demand is the amount of money you wish to

hold outside any interest-bearing asset like bonds.

Refer to question 17 above. As a result, equilibrium money holdings will

increase

If the Fed increases the discount rate or increases the required reserve ratio, equilibrium interest rate will __________ and equilibrium money holdings will __________.

increase; decrease

The opportunity cost of holding money

increases as the interest rate increases.

The quantity of money demanded will decrease if the

interest rate increases.

The opportunity cost of holding money is the

interest rate.

The benefit of holding money is

it enables you to make payments.

Refer to question 15 above. As a result, equilibrium money holdings will

not change

When the opportunity cost of holding money increases, then

people want to hold less money.

Which of the following shifts the demand for money curve?

change in real GDP change in the price level

In the money market, if real GDP increases, then the demand for money ________ and the equilibrium interest rate ________.

increases; rises

When real GDP increases, the demand for money ________ and the demand for money curve ________.

increases; shifts rightward

When the interest rate increases, the

quantity of money demanded decreases and there is a movement upward along the demand for money curve.

The Fed increases the money supply by buying securities in the open market. As a result the money supply curve will shift _________ and the equilibrium interest rate __________.

right;decreases

An increase in the price level leads to a

rightward shift in the demand for money curve.

The demand for money increases and the demand for money curve shifts rightward if

the price level increases.

The supply of money curve is

vertical; the quantity of money supplied is fixed at any point of time since it is controlled by the Fed and is independent of the interest rate.

12) In the above figure, a movement from A to C represents

an increase in the demand for money that might be the result of an increase in real GDP.

In the money market, if the price level falls, then the demand for money ________ and the equilibrium interest rate ________.

decreases; falls