Money And Demand

What happens to the quantity demanded of money when interest rates increases?
 Quantity demanded falls because  its would prefer to have interest earning assets of borrowed liabilities

What happens to the  quantity demanded when interest rate decreases?
quantity demanded increases there is no incenitive to convert cash into interest if the price level increases
 M2 shifts to the right:

• Changes in PL
• Changes in income 
• changes taxtation that affects investments 

If the FED increses the money supply a temporary surplus of money will occur at 5% interest.
The surplus will cause the interest rate will fall Increase MS > deccrease
If the FED decreases Money supply
Decrease MS> increase interest rate > decrease investment> decrease AD