2. Money supply, money demand, and adjustment to monetary equilibrium The following table vives the quantity of money demanded at various price levels (P), the money demand schedule. In the following table, fill in the column fabeied Vaive of Money: Now consider the relationship between the quantty of money that people demand and the price level. The lower the price level, the required to complete transactions, and the less money people will want to hold in the form of currency or demand deposits. Assume that the Federat Reserve initally fores the quantity of money ruppled at 33,5 bilion Use the orange ine (square s.mibel) to plot the intiad monoy supply (MSS) set by the Fed, Then, referring to the grevious table, use the blue connected points (cirde symbol) to graph the moner demand curve. According to vour graph, the equilibrium value of money is , therefore the equilibrium price level is Now, suppose that the Fed reduces the money supply from the initial level of $3.5 bilition to 52 billion. In order to reduce the mpney supply, the Fed can use open market operations to Use the purnle bne (diamond symboi) to plot the new money supply (MSy). Immediately after the Fed changes the mooev supply from its initial equilibrium level, the quantity of money supplied is quantity of money demanded at the initial equlibrium. This contraction in the money supply wiil peoole's demand for goods and Eervices. In the iong run, since the economy's ability to produce goods and services has not changed, the prices of goods and servises will the vafue of money will Use the orange line (square symbol) to plot the intial money supply (MS.) set by the fed. Then, referring to the previous table, use the blue connected paints. (circle symbol) to graph the money demand curve. 2. Money supply, money demand, and adjustment to monetary equilibrium The following table vives the quantity of money demanded at various price levels (P), the money demand schedule. In the following table, fill in the column fabeied Vaive of Money: Now consider the relationship between the quantty of money that people demand and the price level. The lower the price level, the required to complete transactions, and the less money people will want to hold in the form of currency or demand deposits. Assume that the Federat Reserve initally fores the quantity of money ruppled at 33,5 bilion Use the orange ine (square s.mibel) to plot the intiad monoy supply (MSS) set by the Fed, Then, referring to the grevious table, use the blue connected points (cirde symbol) to graph the moner demand curve. According to vour graph, the equilibrium value of money is , therefore the equilibrium price level is Now, suppose that the Fed reduces the money supply from the initial level of $3.5 bilition to 52 billion. In order to reduce the mpney supply, the Fed can use open market operations to Use the purnle bne (diamond symboi) to plot the new money supply (MSy). Immediately after the Fed changes the mooev supply from its initial equilibrium level, the quantity of money supplied is quantity of money demanded at the initial equlibrium. This contraction in the money supply wiil peoole's demand for goods and Eervices. In the iong run, since the economy's ability to produce goods and services has not changed, the prices of goods and servises will the vafue of money will Use the orange line (square symbol) to plot the intial money supply (MS.) set by the fed. Then, referring to the previous table, use the blue connected paints. (circle symbol) to graph the money demand curve