Question

Draw Graphs for:

the Purchasing Power of Money, the Price/Quantity, and the Quantity-of-Loanable Funds graphs for the case of a decreasing supply of money and credit.

Answer 1

→ Decrease in and credit supply has the following inpack money 7 Purchasing Power of Money & Guntinly of money TM 161 Pimo Mi Mo 27 Price Quantity of output } With fall in mong supply, purchasing power o wes because • Demand for given denamed for with limited money, iwoning supply in money, the power of money rues. Here funchasing facer rise using AS-AD model in falls Aggregate Demand weten with we fall in Money supply because the demand a money held falling and there is lack of demand for westment (4) Output Henie Output falls from de-a Price ASI Revel ho because AD2 ADE 0 d2 QI Rest oop Price falls from Polz 37 Loanable funds Market & .So Rate hoana ju of The quantity of suppliable fall with fall money supply [from house Hence the late of interest rises and ro Do hornabile funds allo quantity of falls, Ang Aloe fuerint t Loorable flinds. CS Scanned with CamScanner