Draw a Graph of a Money Demand Curve and a Money

question 17

Essay

Draw a graph of a money demand curve and a money supply curve. On the graph, indicate the equilibrium interest rate. Also indicate the new equilibrium interest rate if the Fed increases the money supply.

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Definitions:

Increase in Demand

Occurs when more of a good or service is sought by consumers at each and every price, often represented by a rightward shift of the demand curve.

Equilibrium Quantity

The quantity of goods or services that is supplied and demanded at the equilibrium price, where supply equals demand.

Demand Falls

A situation where there is a decrease in the quantity of a product or service that consumers are willing and able to purchase at a given price.

Equilibrium Quantity

At the market equilibrium price, the amount of goods or services offered matches the amount requested.