The following table gives the quantity of money demanded at various price levels (P), the money demand schedule. In the following table, ll in the column labeled Value of Money. Quantity of Moneyr Demanded Price Level (P) Value of Money (up) (Billions of dollars) 1.00 1.00 v 2.0 1.33 0.75 v 2.5 2.00 0.50 v 4.0 4.00 0.25 v 0.0 Now consider the relationship between the quantity of money that people demand and the price level. The lower the price level, the less 7 money required to complete transactions, and the less v money people will want to hold in the form of currency or demand deposits. Assume that the Federal Reserve initially xes the quantity of money supplied at $4 billion. Use the orange line (square symbol) to plot the initial money supply {M31} set by the Fed. Then, referring to the previous table, use the blue connected points (circle symbol} to graph the money demand curve. 1.25 1.00 O MS 0.75 O Money Demand VALUE OF MONEY 0.50 O MS, 0.25 O 0 1 2 3 6 7 B QUANTITY OF MONEY (Billions of dollars)