Question

Heading 1 Normal A No Spacing Heading 2 PART II -- GRAPHING EXERCISES (Second of two exercise questions - each 15 pts. IF YOUR LAST NAME BEGINS WITH LETTERS M THROUGH Z DO CASE 3. IF YOUR LAST NAME BEGINS WITH LETTERS A THROUGH L DO CASE 4. On this examination copy, on the page below, draw the three graphs required to answer the graphing exercise question specified immediately below. Case 3: Draw the Purchasing Power of Money, the Price/Quantity and the Quantity-of- Loanable Funds graphs for the case of an increasing demand of money and credit. Case 4: Draw the Purchasing Power of Money, the Price/Quantity and the Quantity-of- Loanable Funds graphs for the case of a decreasing demand of money and credit. IF

3 graphs one for purchasing power of money one for the price/quantity and the other one for the quantity of loanable funds

Answer 1

Rise in demand of loanable funds will shift its demand curve to its right which raise rate of interest as well as quantity of funds traded as depicted in diagram below.

interest 3. - ^. D 44 connable funds

Aggregate demand = Consumption + Investment + Government spending + Exports - Imports

Investment and Interest rate have negative relationship with each other. Rise in rate of interest will reduces investment level which reduces aggregate demand and shift aggregate demand curve to its left which reduce price as well as quantity traded.

Fall in price raise purchasing power of money as the same money can buy more units.