Chapter Checkpoint

Study Plan Problems and Applications

  1. Draw a graph to illustrate the demand for money. On the graph show the ­effect of an increase in real GDP and the effect of an increase in the number of families that have a credit card.

  2. If the Fed makes a decision to cut the quantity of money, explain the short-run effects on the quantity of money demanded and the nominal interest rate.

  3. The Fed conducts an open market purchase of securities. Explain the effects of this action on the nominal interest rate in the short run and the value of money ...

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