Question 1
Refer to the information provided in Figure 25.2 below to answer the question(s) that follow.
Refer to Figure 25.2. Suppose money demand is currently at Point
A. An increase money demand could be caused by
◦ an increase in the interest rate.
◦ an increase in nominal income.
◦ a decrease in the interest rate.
◦ a decrease in nominal income.
Question 2
Refer to the information provided in Figure 25.2 below to answer the question(s) that follow.
Refer to Figure 25.2. Suppose money demand is currently at Point
A. A decrease in the interest rate to 5%,
ceteris paribus, will likely
◦ decrease the quantity of money demanded from $200 million to $100 million.
◦ increase the quantity of money demanded from $100 million to $200 million.
◦ increase the quantity of money demanded from $100 million to $150 million.
◦ increase the quantity of money demanded from $150 million to $300 million.
Terry Winters, Color and Information.
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