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2. Money supply, money demand, and adjustment to monetary equilibrium The following table shows a money demand schedule, which is the quantity of money demanded at various price levels (P). Fill in the Value of Money column in the following table. Quantity of Money Demanded Price Level (P) Value of Money (1/P) (Billions of dollars) 0.80 2.0 2.5 1.00 1.33 4.0 2.00 8.0 Now consider the relationship between the price level and the quantity of money that people demand. The higher the price level, the money the typical transaction requires, and the money people will wish to hold in the form of currency or demand deposits Assume that the Fed initially fixes the quantity of money supplied at $2.5 billion. Use the orange line (square symbol to plot the initial money supply (MS) set by the Fed. Then, referring to the previous table, use the blue connected points (circle symbol) to graph the money demand curve

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