4. Consider a simple economy with only one form of money, which is currency. In this economy, the demand for money is gi
Posted: Sat Mar 19, 2022 5:50 pm
- 4 Consider A Simple Economy With Only One Form Of Money Which Is Currency In This Economy The Demand For Money Is Gi 1 (79.25 KiB) Viewed 42 times
Calculate (a) the equilibrium interest rate if the supply of
currency is fixed at $2000 and (b) the change in the interest rate
that would occur if the central bank increased the supply of
currency by 10% (calculate to two decimal places).
- 4 Consider A Simple Economy With Only One Form Of Money Which Is Currency In This Economy The Demand For Money Is Gi 2 (32.6 KiB) Viewed 42 times
Thanks!
4. Consider a simple economy with only one form of money, which is currency. In this economy, the demand for money is given by the equation: $100 Md = r
a. Md = $2000- $2000 = $100/r- r=5% b. Increase in Ms = 10% *2000 = 200'+ New Ms = $2000+$200 = $22004 New Md = $2200 $2200 = $100/r- r=4.55% Change in r = New eam r - Initial eam r = 4.55% - 5% = -0.45%