When the money market is drawn with the value of money on the vertical axis, an...

When the money market is drawn with the value of money on the vertical axis, an increase in the price level causes a

a. shift to the right of the money demand curve.
b. shift to the left of the money demand curve.
c. movement to the left along the money demand curve.
d. movement to the right along the money demand curve.

Answer is D, but why? What's the difference between a shift versus a movement? What concepts need to be understood in order to arrive at this answer? Please explain.

Solutions

Expert Solution

Answer:-

According to the above question when the money market is drawn with the value of money on the vertical axis, an increase in the price level causes a movement to the right along the demand curve because movement along the demand curve will occur when the price of the good changes and the quantity demanded changes with accordance to the original and exact demand relationship and it is to the right because there is an increase in the level of price which will definitely cause a movement to the right side of the demand curve, if there would be a decrease in the price then the movement to the left along the demand curve could happen, but in the given question there is increase in the price.

It could be better understood with a curve:-

Difference between a Shift versus a Movement are:-

SHIFT:-

A shift in the demand curve changes when a good's quantity demanded changes even though the price remains constant and same.
There is a change in quantity demanded due to some other factors causing the curve to shift to a particular side.
Price is non-determinant.
It indicates a change in demand.
Demand curve will shift rightwards of leftwards.

Movement:-

A Movement in demand curve is when the commodity faces both change in price and quantity demanded, causing a curve to move in specific direction.
There is a change along the curve.
The determinant is price.
There is a change in quantity demanded.
The Demand curve will move upward or downward.

Curve of A Shift in Demand Curve-

Curve Of Movement along the Demand Curve-

That's all to understand about a shift and movement along the demand curve.

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

When the money market is depicted in a diagram with the value of money on the...

When the money market is depicted in a diagram with the value of money on the vertical axis, which of the following happens if the price level is above the equilibrium level? a. There is a shortage, so the price level will fall. b. There is a shortage, so the price level will rise. c. There is a surplus, so the price level will rise. d. There is a surplus, so the price level will fall.

In a labor market graph, _ is measured on the vertical axis, and _ is measured...

In a labor market graph, _____ is measured on the vertical axis, and _____ is measured on the horizontal axis. product price; number of workers number of workers; product price wage; hours of labor hours of labor; wage

Assume the labor market is in equlibrium (a) With wages on the vertical axis and employees...

Assume the labor market is in equlibrium (a) With wages on the vertical axis and employees on the horizontal axis, draw the supply and demand curves and show the optimal wage (w∗) and employment level (E∗). Now, assume the government has introduced a tax on employers. Show graphically what will happen in the short-run (one shift) and in the long-run (two shifts). What happened to the equilibrium wage and employment after each shift? (b) Draw a new graph using the...

When the indifference curve with Good A on the vertical axis and Good B on the...

When the indifference curve with Good A on the vertical axis and Good B on the horizontal axis is tangential to the budget line, then at that point, the marginal rate of substitution of Good A for Good B is equal to the ratio of the price of Good A and Good B (PA/PB) True False The rate at which one input can be exchanged for another input without altering the level of output is called the Marginal product curve...

Suppose labor is on the horizontal axis and capital is on the vertical axis. If the...

Suppose labor is on the horizontal axis and capital is on the vertical axis. If the wage rate is $15 per worker per hour and the rental rate of capital is $10 per unit per hour, what is the slope of the isocost curve? A. Option A: –0.667 B. Option B: –15 C. Option C: –10 D. Option D: –1.5

Good Y is on the vertical axis and good X is on the horizontal axis. If...

Good Y is on the vertical axis and good X is on the horizontal axis. If the slope of the indifference curve is steeper than the slope of the budget line then:MRS < −PX/PY.the consumer is willing to give up more of good Y to get additional units of good X.MRS < PX/PY.the consumer’s utility is maximized.the consumer is willing to give up more of good X to get an additional units of good Y.

assume that food is measured on the horizontal axis and clothing on the vertical axis. if...

assume that food is measured on the horizontal axis and clothing on the vertical axis. if the price of food increases relative to that of clothing, the budget line will.... a- become flatter b- becom steeper c- shitf outward d-become steeper or flatter depending on the relationship between price and income. e- none of the above Every optimal choice point - Indicates a point on the income consumption curve - represents tangency - maximizes demand - all if the above...

A polarizing filter has a vertical transmission axis. When unpolarized light shines on the filter______(twice as...

A polarizing filter has a vertical transmission axis. When unpolarized light shines on the filter______(twice as much light?, half as much light?, no light?, the same amount of light?) emerges. When vertically polarized light shines on the filter _____(twice as much light?, half as much light?, no light?, the same amount of light?) emerges. When horizontally polarized light shines on the filter ________(twice as much light?, half as much light?, no light?, the same amount of light?) emerges. In every...

Draw a graph with leisure on the horizontal axis and income onthe vertical axis. Assume...

Draw a graph with leisure on the horizontal axis and income on the vertical axis. Assume 320 discretionary hours in a month, that can be used for labor or leisure, and that the wage is $13 an hour. Draw the budget constraint, and an indifference curve corresponding to choosing a full time 160 hour a month job. Label earnings. Assume the family would qualify for $785 in TANF benefits each month if hours of labor are zero. The program offers...

Using a graph of money market demonstrate what happens to the value of money and the...

Using a graph of money market demonstrate what happens to the value of money and the price level if : (10 points) (a) The Fed sells government bonds in open-market operation. (b) A decrease in real GDP decreases the demand for money.

Subjects