The graph shows equilibrium in the money market. The equilibrium interest rate is determined at point...

 

 

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The graph shows equilibrium in the money market. The equilibrium interest rate is determined at point E where the money demand and money supply curves intersect. Suppose the Fed wants to lower the equilibrium interest rate. 1.) Using the line drawing tool, draw a new money demand or money supply curve that can show how the Fed would accomplish this objective. Properly label the new line. 2.) Using the point drawing tool, identify the new equilibrium point. Label it F. Note: Carefully follow the instructions above, and only draw the required objects. Interest rate, i 2- 1- 10- 9- 8- Money Market Equilibrium MS 7- E MD1 6 8 10 12 14 16 18 20 Quantity of Money, M (billions of dollars) Excess reserves OA. are the deposits that banks do not use to make loans. B. are reserves banks keep above the legal requirement. OC. are reserves banks keep to meet the reserve requirement. OD. are loans made at above market interest rates. Suppose the required reserve ratio is 10% and a bank has the following balance sheet: This bank keeps required reserves of $1100 and excess reserves of $1100. (Enter your responses as integers.) Assets Liabilities Reserves $2,200 Deposits $11,000 $8,800 Loans The graph shows equilibrium in the money market. The equilibrium interest rate is determined at point E where the money demand and money supply curves intersect. Suppose the Fed wants to lower the equilibrium interest rate. 1.) Using the line drawing tool, draw a new money demand or money supply curve that can show how the Fed would accomplish this objective. Properly label the new line. 2.) Using the point drawing tool, identify the new equilibrium point. Label it F. Note: Carefully follow the instructions above, and only draw the required objects. Interest rate, i 2- 1- 10- 9- 8- Money Market Equilibrium MS 7- E MD1 6 8 10 12 14 16 18 20 Quantity of Money, M (billions of dollars) Excess reserves OA. are the deposits that banks do not use to make loans. B. are reserves banks keep above the legal requirement. OC. are reserves banks keep to meet the reserve requirement. OD. are loans made at above market interest rates. Suppose the required reserve ratio is 10% and a bank has the following balance sheet: This bank keeps required reserves of $1100 and excess reserves of $1100. (Enter your responses as integers.) Assets Liabilities Reserves $2,200 Deposits $11,000 $8,800 Loans