money supply

Question 1

The money market represents the …

Answer 1

supply and demand for money in an economy.

Question 2

the money market determines _________, which impact borrowing, spending, and overall economic activity.

Answer 2

interest rates

Question 3

Transaction Demand:

Answer 3

Money held for daily purchases (e.g., groceries, rent).

as income rises, transaction demand increases

Question 4

Asset Demand:

Answer 4

Money held as an asset instead of other investments (stocks, bonds).

when interest rates are high, people prefer to invest rather than hold cash.

Question 5

Money demand is _________________, showing that at higher interest rates, people hold less money, and at lower interest rates, they hold more.

Answer 5

downward sloping

Question 6

Money Supply (MS)-

Controlled by the central bank by 3 ways…

Answer 6

The total amount of money available in the economy.

1. Ratio reserve
2. discount rate
3. Open market operations

Question 7

o The central bank increases the money supply, shifting MS rightward.

o Lower interest rates → More borrowing & spending → Economic growth.

Answer 7

Expansionary Monetary Policy

Question 8

o The central bank decreases the money supply, shifting MS leftward.

o Higher interest rates → Less borrowing & spending → Slower inflation

Answer 8

Contractionary Monetary Policy:

Question 9

in the money market
Y is
X is

Answer 9

Interest rates

quantity of money