K The graph shows the money market. If the quantity of money is $6.0 trillion and the Fed decreases it to $5.9 trillion, how will the price of a bond change? Why? The graph shows the demand for money curve and the supply of money curve. The Fed decreases the quantity of money to $5.9 trillion. Draw a new MS curve that shows the effect of Fed's action. Label it. Draw a point at the new equilibrium quantity of money and interest rate. The equilibrium interest rate before the Fed decreases the quantity of money is percent a year. After the decrease in the quantity of money, at an interest rate of 4 percent a year, people want to hold money so they bonds. OA. more; buy OB. less; buy OC. less; sell OD. the same quantity of; buy some bonds and sell some OE. more; sell The price of a bond and the interest rate. OA. falls; rises OB. does not change; does not change OC. rises; rises OD. falls; falls OE. rises; falls 7- 6- 3- 2- 1- 0+ 5.8 Nominal interest rate (percent per year) 5.9 MS 6.0 6.0 MD 6.1 6.2 E Quantity of money (trillions of dollars) >>> Draw only the objects specified in the question.

K The graph shows the money market. If the quantity of money is $6.0 trillion and the Fed decreases it to $5.9 trillion, how will the price of a bond change? Why? The graph shows the demand for money curve and the supply of money curve. The Fed decreases the quantity of money to $5.9 trillion. Draw a new MS curve that shows the effect of Fed's action. Label it. Draw a point at the new equilibrium quantity of money and interest rate. The equilibrium interest rate before the Fed decreases the quantity of money is percent a year. After the decrease in the quantity of money, at an interest rate of 4 percent a year, people want to hold money so they bonds. OA. more; buy OB. less; buy OC. less; sell OD. the same quantity of; buy some bonds and sell some OE. more; sell The price of a bond and the interest rate. OA. falls; rises OB. does not change; does not change OC. rises; rises OD. falls; falls OE. rises; falls 7- 6- 3- 2- 1- 0+ 5.8 Nominal interest rate (percent per year) 5.9 MS 6.0 6.0 MD 6.1 6.2 E Quantity of money (trillions of dollars) >>> Draw only the objects specified in the question.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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