Figure 11-1

-Refer to the Figure 11-1.If the money supply is MS₂ and the value of money is 2,how much is the excess demand or supply?

Question

Figure 11-1
 
-Refer to the Figure 11-1.If the money supply is MS₂ and the value of money is 2,how much is the excess demand or supply?

Quizplus · Accepted Answer

At MS₂ and value of money 2, the equilibrium point is at B, where the quantity of money demanded equals the quantity of money supplied. Point A represents the quantity demanded at the given value of money, which is higher than the quantity of money supplied (represented by point C) at MS₂. Therefore, there is an excess supply, which is equal to the distance between A and B (represented by the vertical distance between A and B). Hence, the correct answer is D.

Figure 11-1 -Refer to the Figure 11-1.If the Money Supply Is MS₂