Fill in order details

  • Submit your instructions
    to writers for free!

Chat with the writer

  • Chat with preferred expert writers
  • Request a preview of your paper
    from them for free


  • Project edited by the quality evaluation department

Download Your Completed Project

  • Download the completed project from your account or have it sent to your email address

SOLVED! Suppose that you never carry cash. Your paycheck of $1,000 per month is deposited directly into your checking account

Chapter 15

Question 1

(Money Demand) Suppose that you never carry cash. Your paycheck of $1,000 per month is deposited directly into your checking account, and you spend your money at a constant rate so that at the end of each month your checking account balance is zero.

  1. What is your average money balance during the pay period?
  2. How would each of the following changes affect your average monthly balance?
    1. You are paid $500 twice monthly rather than $1,000 each month.
    2. You are uncertain about your total spending each month.
    3. You spend a lot in the beginning of the month (e.g., for rent) and little at the end of the month.
    4. Your monthly income increases.


a. Your average balance is $500.


  1. Your money demand would fall because your average balance would decrease to $250.
  2. Your money demand would increase because you would be less likely to let your balance fall to zero.
  3. Your money demand would decrease because your average balance would decrease.
  4. Your money demand would increase.

2. (Market Interest Rate) With a diagram, show how the supply of money and the demand for money determine the rate of interest? Explain the shapes of the supply curve and the demand curve.


The money demand curve, Dm , slopes downward. As the interest rate falls, other things constant, so does the opportunity cost of holding money; the quantity of money demanded increases. Because the supply of money is determined by the Federal Reserve, it can be represented by a vertical line. At point a, the intersection of supply of money, Sm , and the demand for money, Dm , determines the market interest rate, i. Following an increase in the money supply to S′m, the quantity of money supplied exceeds the quantity demanded at the original interest rate, i.

People attempt to exchange money for bonds or other financial assets. In doing so, they push down the interest rate to i′, where quantity demanded equals the new quantity supplied. This new equilibrium occurs at point b.

9. (Money Supply Versus Interest Rate Targets) Assume that the economy’s real GDP is growing.

a. What will happen to money demand over time?

b. If the Fed leaves the money supply unchanged, what will happen to the interest rate over time? c. If the Fed changes the money supply to match the change in money demand, what will happen to the interest rate over time?

d. What would be the effect of the policy described in part (c) on the economy’s stability over the business cycle?


a. Money demand will increase.

b. If the money supply remains unchanged, the interest rate will also increase.

c. If the Fed increases the money supply at the same rate as money demand is rising, the interest rate will not change.

d. Following the policy described in part (c) requires the Fed to increase the money supply during expansions and decrease it during contractions. Thus, during expansions, the Fed is reinforcing the increasing aggregate demand; during contractions it is reinforcing the decreasing aggregate demand. Both expansions and contractions would tend to be stronger, thus adding more instability to the economy

We Will Handle Your Entire Online Class Assignments with a Guarantee of Excellent Grades. 

What our customers say

Ishita M.
Ishita M.
Great Job! Thank you so much for your work. You got it done faster than I imagined and everything is perfect. Will definitely be using you again!
Megan J.
Megan J.
"As a wife, mother, and full-time student, I was struggling to try to go back to school and take care of my responsibilities. Sometimes you just need a little help, and I appreciate all the help I have gotten from Academic Research Bureau. My papers are on-time and the writers ...
Rajab M.
Rajab M.
Academic Research Bureau has saved me a lot of time. I was tired of taking the same classes many times over again. As an ESL student, my professors were taking points off of my assignments for my grammar mistakes. It made it very hard to feel encouraged to continue with ...
Frank N.
Frank N.
As a working student, I just really don't have the time to write paper after paper and complete assignment after assignment. Working full-time and going to school was nearly impossible until I was able to feel comfortable with the writers on this site. They make me feel secure enough to ...
Courtney B.
Courtney B.
Thank you! You were really patient with me and my needs. This was my first time using you guys, however, I will definitely be using you again!
John H.
John H.
I cannot tell you enough how amazing your company is! Your writers are superb, on time, excellent content, so very thankful you reached out to me that day! Lifesaver for sure! Couldn’t be happier with the results I’ve gotten from my first 2 papers with you, I have 4 papers ...
Rebecca T.
Rebecca T.
After I ordered a dissertation from your writing service, the first paper that I was given did not met my professor’s demand. I set the paper on revision and the writer made the revision for free meeting all my requirements and I was very satisfied
Thomas R.
Thomas R.
I was shocked by how your writers managed to deliver my paper on time, and I was among the best in our class in that paper. Thank you so much and I will never hesitate to use you