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Business
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Principles of Macroeconomics Study Set 11
Quiz 11: Money Demand and the Equilibrium Interest Rate
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Question 1
Essay
-Using the graph above what would happen to the interest rate if the money supply decreased.
Question 2
Essay
Illustrate with the use of a graph what would happen to the demand for money as output in the economy expands.
Question 3
Essay
What are the two major forces that determine the demand for money?
Question 4
Essay
Assume that the interest rate paid on bonds rises from 4% to 6%. Explain what would happen to the level of optimal (money) balances.
Question 5
Essay
Assume that Joe earns $2400 a month, deposits it in a checking account and draws down his income evenly throughout the course of the month with an average money holding of $1200. What are the costs of this money strategy?