= PART II 3. Suppose that the money demand function is (M/P) = 1000 – 100r, where r is the interest rate in percent. The

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Part Ii 3 Suppose That The Money Demand Function Is M P 1000 100r Where R Is The Interest Rate In Percent The 1 (37.79 KiB) Viewed 32 times

= PART II 3. Suppose that the money demand function is (M/P) = 1000 – 100r, where r is the interest rate in percent. The Money Supply M is 1000 and the price is 2 a) Graph the supply and demand for real money balances. (2.5 marks) b) What is the equilibrium interest rate? (2.5 marks) c) Assume the price level is fixed, what happens to the equilibrium interest rate if supply of money is raised from 1,000 to 1,200? (2.5 marks) d) If the Central Bank wishes to raise the interest rate to 7 percent, how much should be the money supply? (2.5 marks) 4. Using the data for Zambian economy and population from the table below, Year Real GDP (billion USD) Population 2014 28.5 15,626,445 2015 29 16,145,301 (a) Calculate the 2014 per capita income. (6) Calculate the 2015 per capita income. (c) Calculate the growth rate of real GDP between 2014 and 2015. (d) Calculate the growth rate of real GDP per person. (2 marks) (2 marks) (3 marks) (3 marks)