Question

Suppose the market for money, drawn with the value of money on the vertical axis and the quantity of money on the horizontal axis , is in equilibrium. If the money supply increases, then at the old value of money there is an

Answer 1

If the money supply increases, then at the old value of money there is an excess supply of money that will result in an increase in spending. The entire amount of money in circulation in an economy at any given time is referred to as the money market.

What is money market?

The money market is defined as dealing in debt with a maturity of less than one year. Investors use it to make a modest profit.

While governments and corporations use it to keep their cash flow constant. Long-term debt and equity instruments are sold and bought on the capital market.

Thus, excess supply of money that will result in an increase in spending.

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