Figure 17-2. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are measured along the axes.
-Refer to Figure 17-2. If the relevant money-demand curve is the one labeled MD₁, then the equilibrium value of money is

Question

Figure 17-2. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are measured along the axes.

-Refer to Figure 17-2. If the relevant money-demand curve is the one labeled MD₁, then the equilibrium value of money is

Quizplus · Accepted Answer

The equilibrium value of money occurs where the money supply (MS) intersects with the money-demand curve (MD₁), which in this case is at a value of 0.5. The equilibrium price level occurs where this intersection point intersects with the vertical axis, which in this case is at a value of 2. Therefore, the correct answer is A: 0.5 for the equilibrium value of money and 2 for the equilibrium price level.