Asked by Anh Thy Nguy?n Ng?c on Jul 29, 2024
Verified
When the market for money is drawn with the value of money on the vertical axis and the quantity of money on the horizontal axis, long-run equilibrium is obtained when the quantity demanded and quantity supplied of money are equal due to adjustments in
A) the value of money.
B) real interest rates.
C) nominal interest rates.
D) the money supply.
Money Supply
Money Supply denotes the total volume of money available in the economy, including cash, coins, and balances held in checking and savings accounts.
Value of Money
Refers to the purchasing power of money, or how much goods and services a unit of money can buy.
Real Interest Rates
The interest rate adjusted for inflation, reflecting the true cost of borrowing and the real yield to the lender or investor.
- Analyze how changes in the money supply affect demand, value of money, and economic equilibrium.
Verified Answer
LR
Larissa RamdialAug 01, 2024
Final Answer :
A
Explanation :
In the context of the money market, long-run equilibrium is achieved when the quantity of money demanded equals the quantity supplied, and this balance is primarily adjusted through changes in the value of money. The value of money reflects its purchasing power, which adjusts to equilibrate the demand and supply for money over the long run.
Learning Objectives
- Analyze how changes in the money supply affect demand, value of money, and economic equilibrium.