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If regulation is passed that makes it more difficult for consumers to withdraw money from existing savings accounts, then how is the money market graph affected? O a
If regulation is passed that makes it more difficult for consumers to withdraw money from existing savings accounts, then how is the money market graph affected? O a. increase in equilibrium interest rates, and increase in the equilibrium quantity of money Ob.decrease in equilibrium interest rates, and decrease in the equilibrium quantity of money O c. decrease in equilibrium interest rates, and increase in the equilibrium quantity of money O d. increase in equilibrium interest rates, and decrease in the equilibrium quantity of money O e. no change in equilibrium interest rates, and no change in the equilibrium quantity of money QUESTION 36 36. If the Fed is concerned about inflation and changes the discount rate, then how would the money market graph be affected by the discount rate change that's appropriate in this situation? O a. increase in equilibrium interest rates, and increase in the equilibrium quantity of money Ob.decrease in equilibrium interest rates, and decrease in the equilibrium quantity of money O c. decrease in equilibrium interest rates, and increase in the equilibrium quantity of money d. increase in equilibrium interest rates, and decrease in the equilibrium quantity of money O e. no change in equilibrium interest rates, and no change in the equilibrium quantity of money QUESTION 37 37. What happens within the money market if there is a decrease in the required reserve ratio? O a. increase in equilibrium interest rates, and increase in the equilibrium quantity of money Ob.decrease in equilibrium interest rates, and decrease in the equilibrium quantity of money O c. decrease in equilibrium interest rates, and increase in the equilibrium quantity of money O d. increase in equilibrium interest rates, and decrease in the equilibrium quantity of money O e. no change in equilibrium interest rates, and no change in the equilibrium quantity of money
Expert Solution
1. It is given that the consumers are unable to withdraw money from the banks. It will decrease the money supply in the economy and shifts the supply curve to the left. As a result, interest rate increases and quantity of money decrease. Hence, the correct option is: d. Increase in the equilibrium interest rate, and decrease in the equilibrium quantity of money.
2. Here, aged wants to reduce inflation in the market, due to which it can increase the discount rate that discourages banks to borrow money from the Fed. Therefore, commercials banks will have lesser money to lend. As a result, money supply will decrease. Hence, the correct option is: d. Increase in the equilibrium interest rate, and decrease in the equilibrium quantity of money.
3. Here, reserve requirement is decreased by the Fed that, in turn, increases the money supply in the economy. Hence, the correct option is: c. Decrease in the equilibrium interest rate, and increase in the equilibrium quantity of money.
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