ECONOMICS
AGGREGATE DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Increases the quantity demanded of money.
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Increases the demand for money.
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Decreases the quantity demanded of money
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Decreases the demand for money.
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Does none of the above
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Detailed explanation-1: -When money demand is drawn on a graph with the interest rate on the vertical axis and the quantity of money on the horizontal axis, an increase in the price level shifts money demand to the right. Keynes’s theory of liquidity preference suggests that the interest rate is determined by the supply and demand for money.
Detailed explanation-2: -When the value of money is on the vertical axis, the money supply curve slopes upward because an increase in the value of money induces banks to create more money. When the value of money is on the vertical axis, the money supply curve is vertical and shifts right if the Federal Reserve buys bonds.
Detailed explanation-3: -The graph shows the relationship between the quantity of money, measured on the horizontal axis, and the interest rate, measured on the vertical axis.
Detailed explanation-4: -Key features of the money market-Two axes: a vertical axis labeled “Nominal interest rate” or “n.i.r.” and a horizontal axis labeled “Quantity of Money” or Q M Q M QMQ, start subscript, M, end subscript.