After the increase in the price level, the quantity of money demanded at the ini
ID: 1226161 • Letter: A
Question
After the increase in the price level, the quantity of money demanded at the initial interest rate of 3% will be _____ than the quantity of money supplied by the Fed at this interest rate. People will try to ______their money holdings. In order to do so, people wil___l bonds and other interest-bearing assets, and bond issuers will find that they ____interest rates until the money market reaches its new equilibrium at an interest rate of % _____
The change in the interest rate that you found previously will cause residential and business investment spending ________ , leading to_____ in the quantity of output demanded in the economy.
Explanation / Answer
After the increase in the price level, the quantity of money demanded at the initial interest rate of 3% will be increased than the quantity of money supplied by the Fed at this interest rate. People will try to increase their money holdings. In order to do so, people will sell l bonds and other interest-bearing assets, and bond issuers will find that they high interest rates until the money market reaches its new equilibrium at an interest rate of % higher than original
The change in the interest rate that you found previously will cause residential and business investment spending fall, leading to decrease in the quantity of output demanded in the economy.