DQuestion 24 1 pts An increase in real output decreases the interest rate whilea
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DQuestion 24 1 pts An increase in real output decreases the interest rate whilea fall in real output increases the interest rate gie, the tee O nominal output raises the interest rate while a fall in real output lowers the interest rate, given the price level and the money supply O real output raises the interest rate while a fall in real output lowers the interest rate, given the money supply O real output raises the interest rate while a fall in real output lowers the interest rate, given the price level and the money supply O nominal output raises the interest rate while a fall in real output lowers the interest rate, given the price level. D Question 25 1 pts The aggregate demand for money can be expressed by: Question 26 1 pts What will be the effects of an increase in the money supply on the interest rate? HTML Editor Paragraph .Explanation / Answer
24. real output decreases the interest rate while a fall in real output increases the interest rate, given the price level.
Real output is MS/P. Increase in MS shifts MS curve rightwards causing decrease in interest rate and vice versa.
25. Md = P x L(R, Y)
Demand for money varies inversely with interest rate and directly with income. This is because, interest rate is opportunity cost of keeping cash so, at higher interest rate individuals keeps less cash. On the other hand, at higher income, there will be more transactions which require more cash balance.
26. Increase in money supply shifts MS curve rightwards causing decrease in the interest rate.
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