MONEY, BANKS, AND THE FEDERAL RESERVE WORKSHEET 6 Below, you are provided with a demand schedule and a supply schedule for money. You will use these schedules to construct the money demand and money supply curves. You will identify the equilibrium Federal Funds interest rate. You will then demonstrate a shift of the money supply curve, and examine its effect on the equilibrium Federal Funds rate. Federal Funds Quantity of Money Rate Demanded Sun lied 2.5% $4 trillion 2.0% $4 trillion 1.5% $6 trillion $4 trillion 1.0% $8 trillion $4 trillion 0.5% $10 trillion $4 trillion Part 1: In the space below, construct the money demand and money supply curves. '2! as .......................................................... Interest Rate $2 $4 $6 $8 $10 $12 Quantity of Money [in trillions) Part2: Identify the equilibrium Federal Funds rate in the diagram that you constructed above. Part 3: Suppose that the money supply increases to $8 trillion. In the space above, construct the shifted money supply curve in blue ink. Part 4: Suppose that the money supply increases to $8 trillion. Identify the new equilibrium Federal Funds rate. Part 5: Complete the statement below. When the demand for money shifts right; there is a(n) (increase, decrease) in the equilibrium Federal Funds rate