the AE run mod is a short run model

21) The market demand curve for money is A) Vertical because it is a fixed amount regardless of changes in the interest rate. B) Horizontal because it is determined by the individual. C) Upward-sloping to the right because people wish to hold more money at higher interest rates and less money at lower interest rates. DDownward-sloping to the right because people wish to hold less money at higher interest tes and more money at lower interest rates. Answer: D Explanation: There is an inverse relationship between the interest rate and the amount of money individuals desire to hold, resulting in a downward-sloping money demand curve. 23) The money supply curve as determined by current Federal Reserve policy is Vertical since it's not determined by the interest rate. B) Horizontal since it's not determined by the interest rate. C) Upward-sloping to the right. D) Downward-sloping to the right. Answer: A Explanation: The money supply is set by the Fed and is a fixed amount at any given point in time, resulting in a vertical line 29) Which of the following shifts in the demand for money or the supply of money is most likel occur as the result of a recession? The demand curve shifts leftward. B) The demand curve shifts rightward C) The supply curve shifts rightward. D) Both the demand and supply curves shift rightward. 10.0. 16) Assume the reserve requirement is 25 percent, deman reserves are $32 million. If the reserve requirement is decr system will experience A) Excess reserves equal to $32 million. Excess reserves equal to $68 million. ) No change in the lending capacity D) A deficiency of required reserves equal to $68 million. 17) The federal funds rate is the interest rate charged whern One bank lends reserves to another bank. The Fed lends to banks. C) The Fed lends to individuals. D) Individual banks lend to the Fed. 18) A reduction in the discount rate A) Signals the Federal Reserve's desire for additional credit B) Increases the cost of borrowing reserves from the Federa C) Discourages banks from borrowing reserves from the Fe D) Is consistent with a tight monetary policy. ) If market interest rates rise, the selling price of existing ribus, Rise. all. ot change