Consider the figure below showing the demand for money: (a) Explain why the demand curve for money slopes downwards. (b) A change in the quantity of real money demanded is a movement along the demand curve for money. A change in demand is a shift in the demand curve. What factor(s) can cause (i) a change in the quantity of money demanded and (ii) a change in the demand for money? (c) Suppose the economy is operating at point a and there is a change in interest rates which of these points would it be possible for the economy to move to: b, c, d, e? (d) Suppose the economy is operating at point a and it subsequently moves to point (b), what factor(s) could possibly explain this shift? (e) In this course, you learned that financial innovations affect the demand for money. What are financial innovations? How do financial innovations affect the demand for money?

Consider the gure below showing the demand for money: Interest rate (percent per year] Real money (trillions of 2000 dollars) (a) Explain why the demand curve for money slopes downwards. (b) A change in the quantity of real money demanded is a movement along the demand curve for money. A change in demand is a shift in the demand curve. What factor(s) can cause (i) a change in the quantity of money demanded and (ii) a change in the demand for money? (c) Suppose the economy is operating at point a and there is a change in interest rates which of these points would it be possible for the economy to move to: b, c, d, e? (d) Suppose the economy is operating at point a and it subsequently moves to point (b), what factor(s) could possibly explain this shift? (e) In this course, you learned that nancial innovations affect the demand for money. What are nancial innovations? How do nancial innovations affect the demand for money