Asked by Tonii White on May 01, 2024
Verified
Refer to Figure 30-1. If the money supply is MS2 and the value of money is 4, then the quantity of money
A) demanded is greater than the quantity supplied; the price level will rise.
B) demanded is greater than the quantity supplied; the price level will fall.
C) supplied is greater than the quantity demanded; the price level will rise.
D) supplied is greater than the quantity demanded; the price level will fall.
Quantity of Money
The total amount of money circulating within an economy, including cash and bank deposits, crucial for determining inflation and interest rates.
Price Level
Refers to the average of current prices across the entire spectrum of goods and services produced in the economy.
- Recognize how changes in the money supply curve impact equilibrium value, price levels, and the demand for money.
Verified Answer
BN
Bre-Bre NorrisMay 02, 2024
Final Answer :
C
Explanation :
When the quantity of money supplied is greater than the quantity demanded, it indicates an excess supply of money in the economy. This typically leads to inflation, causing the price level to rise, as more money chases the same amount of goods and services.
Learning Objectives
- Recognize how changes in the money supply curve impact equilibrium value, price levels, and the demand for money.