Figure 12-3. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are measured along the axes.

-Refer to Figure 12-3. If the relevant money-supply curve is the one labeled MS₁, then the equilibrium price level is

Question

Figure 12-3. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are measured along the axes.

-Refer to Figure 12-3. If the relevant money-supply curve is the one labeled MS₁, then the equilibrium price level is

Quizplus · Accepted Answer

The equilibrium price level is where the money supply (MS) and money demand (MD) curves intersect. From the graph, we can see that the intersection occurs at a price level of 2. At this price level, the equilibrium value of money cannot be determined from the graph because it depends on the level of output in the economy.