Figure 12-1 -Refer to Figure 12-1. If the Current Money Supply Is

question 71

Multiple Choice

Figure 12-1

-Refer to Figure 12-1. If the current money supply is MS₁, then

• A) there is no excess supply or excess demand if the value of money is 2.
• B) the equilibrium is at point C.
• C) there is an excess supply of money if the value of money is 1.
• D) None of the above is correct.

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Definitions:

Excess Demand

A situation where the demand for a product exceeds its supply at the current price, often leading to price increases.

Equilibrium Quantity

The quantity of goods or services that is supplied and demanded at the equilibrium price.

Demand Increases

A situation where the quantity of a product or service desired by buyers exceeds the quantity supplied at a particular price.

Supply Decreases

A condition in the market where the quantity of a product or service available for sale declines, which can lead to higher prices.