Figure 21-2

question 350

Multiple Choice

Figure 21-2. On the left-hand graph, MS represents the supply of money and MD represents the demand for money; on the right-hand graph, AD represents aggregate demand. The usual quantities are measured along the axes of both graphs.
-Refer to Figure 21-2. Assume the money market is always in equilibrium. Under the assumptions of the model,

• A)the real interest rate is higher at Y₂ than it is at Y₁.
• B)the quantity of money is the same at Y₁ as it is at Y₂.
• C)the price level is higher at r₂ than it is at r₁.
• D)All of the above are correct.

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Definitions:

Bad Debt Expense

The cost associated with accounts receivable that a company does not expect to collect because customers default on their payments.

Note Duration

The length of time until a promissory note, or loan agreement, is due to be paid in full.

Face Value

The nominal or dollar value printed on a financial instrument, such as a bond or stock certificate, indicating its worth at issuance.

Interest Rate

The percentage charged on the total amount of borrowed money or paid on investments, over a specific period of time.