Below you find several incidents that are the consequence of
shifts in either Money Supply or Money Demand.
First, tell me whether the instance is due to a
Supply or Demand shift. Second, state which
specific shifter is responsible for the incident at hand.
Lastly, tell me what effect the respective shift
has on the interest rate.
i. Firms recognize that loans have become cheaper recently
ii. People engage in more transactions
iii. The amount of bonds in the money market increases even
though no new bonds have been issued recently
iv. Firms were forced to cut back the volume of loans