ashenure9 ashenure9

31-12-2022
Business

Answered

Suppose that the money demand function is (M/P)d = 1,000 - 100r, where r is the interest rate in percent. The money supply M is 1,000 and the price level P is 2.
a. Graph the supply and demand for real money balances.
b. What is the equilibrium interest rate?
c. Assume that the price level is fi xed. What happens to the equilibrium interest rate if the supply of money is raised from 1,000 to 1,200?
d. If the Fed wishes to raise the interest rate to 7 percent, what money supply should it set?

Answer :

Other Questions

Assume that the Federal Reserve increases the money supply by purchasing government bonds in the secondary market. Show and describe the effects of such an incr

A U.S. Treasury strip that will pay $1,000 in 10 years is selling today for $422.41. What interest rate does the bond offer? (Do not round intermediate calculat

Assume the expected inflation rate in a country is 3%, the current unemployment rate is 4%, and the natural rate of unemployment is 5%. (a) Draw a correctly lab

A local bank will pay you $100 at the end of each year for your lifetime if you deposit $2,500 in the bank today. If you plan to live forever, what interest rat

Assume a profit-maximizing monopolist is able to price discriminate, dividing its consumers into two distinct groups charging each a different price. Based on t

Part II. Choose the best answer from the given alternatives (1 Point each). 1. Which one of the following is an example of normative economics? A. The life expe

It has been argued that the exchange rate can be used as a policy tool. Assume that the U.S. government would like to reduce unemployment. Which of the followin

Question 3 (30 points) Consider an economy that produces only the following amount of products with the correspond- ing prices in two different years: Version 1

If the price of apples increases by 10% and the quantity demanded falls by 20%, then the price..

2.- Regarding Money Laundering issues: a) A cross-border intra-firm loan should be considered as a placement stage step b) The transfer from a bank account for