M15_BADE_9418_04_CH12 - 12 Chapter Money Interest and Inflation ANSWERS TO CHECKPOINTS CHECKPOINT 12.1 Money and the Interest Rate 1 formoneycurve The

M15_BADE_9418_04_CH12 - 12 Chapter Money Interest and...

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Money, Interest, and Inflation Chapter 12 ANSWERS TO CHECKPOINTS CHECKPOINT 12.1 Money and the Interest Rate 1.The figure shows the demand for money curve. The quantity of money supplied is $3.9 trillion. What is the nominal interest rate? 2.The figure shows the demand for money curve. If real GDP decreases,  how will the interest rate change? Explain what happens in the market for bonds as the money market returns to equilibri-um.
208 Part 4 . THE MONEY ECONOMY 3.The figure shows the demand for money curve. If the Fed increases the quant-ity of money from $3.9 trillion to $4.0 trillion, what is the change in the nomin-al interest rate? What happens to the price of bonds? 4.Suppose that banks launch an aggressive marketing campaign to get everyone to use credit cards for every conceivable transaction. They offer prizes to new cardholders and slash the interest rate on outstanding credit card balances. How would the demand for money and the nominal interest rate change? CHECKPOINT 12.2 Money, the Price Level, and Inflation

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