Msz Ms, Msz Interest rate Interest rate (%) 6 O Investment demand 70 120 170 Investment ($) 100 200 300 Amount of money

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Msz Ms Msz Interest Rate Interest Rate 6 O Investment Demand 70 120 170 Investment 100 200 300 Amount Of Money 1 (206.96 KiB) Viewed 26 times

(a) Look at graph A and suppose
the supply of money increases from 100 to 200. What will be
the equilibrium rate of interest?
(b) Look at graph B which
shows an investment-demand curve for this economy. Given
the answer to part (a) above, how much will investors plan to spend
on capital goods?
(c) What will happen to
aggregate demand ?

increasedecreaseClick for List
(d) Trace what will happen in
parts (a)–(c) if the money supply increases to $300:
The equilibrium rate of interest
is %. Investment
is . Aggregate demand
will
increasedecreaseClick for List .
Msz Ms, Msz Interest rate Interest rate (%) 6 O Investment demand 70 120 170 Investment ($) 100 200 300 Amount of money demanded and supplied ($) (A) (B) AS Price Level AD3 - AD2 AD1 GDP GDP2 GDP3 Real Domestic Output
Msz Ms, Msz Interest rate Interest rate (%) 6 O Investment demand 70 120 170 Investment ($) 100 200 300 Amount of money demanded and supplied ($) (A) (B) AS Price Level AD3 - AD2 AD1 GDP GDP2 GDP3 Real Domestic Output