Explain what happens to real money supply and real money demand in each of the following scenarios in the short-run. Illustrate your answer using a diagram with real interest rate on the vertical axis and real money on the horizontal axis. Label the axes and curves clearly.

a). Nominal money supply increases

b). Many more stores accept digital payment technologies like credit cards

c). Current output rises

d). Stock market crashes

e). Price Level rises and nominal money supply is fixed

Answer rating: 100% (QA)

a An increase in nominal money supply results into higher real money stock at each level of prices T... View the full answer