ID: A s (3) ID: A Market for Money in Country Z MS MD 38 Use the graph for Count
ID: 1153646 • Letter: I
Question
ID: A s (3) ID: A Market for Money in Country Z MS MD 38 Use the graph for Country Z above to answer the following question. Suppose that the real income of the consumers of Country Z suddenly decreases. Which of the following could be true? The money demand curve shifts right and the new interest rate is 6% The money demand curve shifts left and the new interest rate is 4% e~ The money supply curve shifts left and the new interest rate is 4% d The money supply curve AND the money demand curve shift such that there is no change in the interest rate. rlGDP in Country A was $10.983,000 in October and $10,996,500 in November. What was the annualExplanation / Answer
Question 38
With respect to real income, there exists a direct relationship between change in real income and the demand for money.
If real income increases then demand for money also increases.
If real income decreases then demand for money also decreases.
So,
If the real income of the consumers of country Z suddenly decreases then in that case the money demand curve will shift to the left and the new interest rate is 4%.
Hence, the correct answer is the option (b).