The supply of money curve is
A)upward sloping,showing the influence of the interest rate.
B)vertical because the quantity of money is fixed at any one moment.
C)horizontal because interest rates are fixed at any one moment.
D)downward sloping,showing the negative influence of the interest rate.
E)horizontal because the Reserve Bank controls the quantity of money supplied.

Question

Quizplus · Accepted Answer

The supply of money curve is vertical because the quantity of money is fixed at any one moment. The central bank controls the supply of money in an economy, and it can fix the quantity of money by adjusting the monetary base, which consists of currency and reserves held by commercial banks. Therefore, the supply of money curve is fixed and vertical in the short run. However, in the long run, the vertical supply curve can shift due to changes in the monetary base or changes in the Reserve Bank's policies.

The Supply of Money Curve Is