To determine the correct option regarding the relationship between money supply and the value of money as represented in Figure 30-1, we need to analyze the situation described.
- Money Supply (MS2): If the money supply is indicated as MS2 on the graph.
- Value of Money: If the value of money is indicated as 2, this typically implies a specific position on the money demand curve.
In general, if the money supply exceeds the demand for money at a given value of money, there will be an excess supply of money. Conversely, if the demand for money exceeds the supply, there would be an excess demand.
Now, based on the information provided:
- If the value of money is 2, and we are given specific points (A, B, C) that likely represent different quantities of money or price levels:
- If point A represents the amount of money supplied and is below point B (the demand curve), it suggests that there is an excess supply of money, as the money supply (MS2) exceeds the demand for money at that value.
From the options given:
- a. refers to excess demand.
- b. suggests excess supply (which fits the scenario).
- c. also refers to excess supply but mentions different points.
- d. again refers to excess demand.
Based on this analysis, the statement that matches the condition of an excess supply of money, given the described scenario, is:
b. supply of money that is represented by the distance between points A and B.
1 answer