When the money market is drawn with the value of money on the vertical axis, the value of money increases if
A)either money demand or money supply shifts right.
B)either money demand or money supply shifts left.
C)money demand shifts right or money supply shifts left.
D)money demand shifts left or money supply shifts right.

Question

Quizplus · Accepted Answer

When the value of money is on the vertical axis, an increase in the value of money represents a decrease in the overall price level. Therefore, a rightward shift in money demand indicates an increase in demand for money, meaning people want to hold more money relative to goods and services. This would cause the value of money to increase, or the price level to decrease. Similarly, a leftward shift in money supply means that there is less money available in the economy, causing the value of money to increase. Thus, a rightward shift in money demand or a leftward shift in money supply would lead to an increase in the value of money.

When the Money Market Is Drawn with the Value of Money