When supply and demand for money are expressed in 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 ?
Correct answer: A. shifts money demand to the right and increases the interest rate
- A. shifts money demand to the right and increases the interest rate
- B. None of these answers
- C. shifts money demand to the right and decreases the interest rate
- D. shifts money demand to the left and increases the interest rate
- E. shifts money demand to the left and decrease the interest rate
Explanation
A higher price level increases the amount of money needed for transactions, shifting money demand rightward. With a fixed money supply, the equilibrium interest rate rises.
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The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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