Suppose that the money demand function is where r is the interest rate in percent. The money

Question:

Suppose that the money demand function is

where r is the interest rate in percent. The money supply M is 2,000 and the price level P is fixed at 5.

a. Graph the supply and demand for real money balances.

b. What is the equilibrium interest rate?

c. What happens to the equilibrium interest rate if the supply of money is reduced from 2,000 to 1,500?

d. If the central bank wants the interest rate to be 4 percent, what money supply should it set?

Step by Step Answer:

Related Book For book-img-for-question

Macroeconomics

ISBN: 9781464182891

9th Edition

Authors: N Gregory Mankiw

See More Books

Question Posted: Feb 29, 2024 05:01 AM

See More Questions

Suppose that the money demand function is (M/P)d = 1,000 100 r, 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...
Suppose that the real money demand function is where Y is real output, r is the real interest rate, and e is the expected rate of inflation. Real output is constant over time at Y = 150. The real...
KYC's stock price can go up by 15 percent every year, or down by 10 percent. Both outcomes are equally likely. The risk free rate is 5 percent, and the current stock price of KYC is 100. (a) Price a...
In this assignment, you will take on the role of the Warden of a maximum custody state correctional facility. Your unit's use of force incidents has dramatically increased over the last year to...
After all the transactions for the year ended May 31, 2016, had been posted, the data below were taken from the records of Angelos Design Ltd. Assume all accounts have normal balances. Instructions...
Angel Creek Nursey, with an authorization of 40,000 shares of preferred stock and 150,000 shares of common stock, completed several transactions involving its stock on August 15, the first day of...
Drive time. Professor Moore, who lives a few miles outside a college town, records the time he takes to drive to the college each morning. Here are the times (in minutes) for 42 consecutive weekdays,...
Mr. Davis was the owner and CEO of Davis Motors, a car company, which manufactured luxury car. Ms. Clara Brown worked there as a technical supervisor. During routine inspections, she found that the...
Miller Companys contribution format income statement for the most recent month is shown below: Total Per Unit Sales (33,000 units) $ 297,000 $ 9.00 Variable expenses 198,000 6.00 Contribution margin...
The following equations describe an economy. a. Identify each of the variables and briefly explain their meaning. b. From the above list, use the relevant set of equations to derive the IS curve....
In the Keynesian cross model, assume that the consumption function is given by Planned investment is 200; government purchases and taxes are both 400. a. Graph planned expenditure as a function of...
How are discontinued operations reported on an interim basis?
1. The interest rate charged on a loan of $85,000 is 7.75% compounded annually. If the loan is to be paid off over seven years, calculate the size of the annual payments. 2. A $10,000 debt is repaid...
Referring to the NISSAN Navara 5L SE M/T, which is using Nissan YD25 engine, provide your analysis to the following questions: A. What will be the maximum power produced by this vehicle at the...
Convert each pair of rectangular coordinates to polar coordinates where r> 0 and 0 <2.
Please type your answers and submit them on Blackboard by the due time. AAA corp. had the following PP&E values on Dec. 31, 2018. Cost $ 100 Accumulated Depreciation $ 20 Undiscounted Future Cash...
Compute the standard deviation"sigma symbol"for ages of British nurses in 1851. Assume that the table below shows the age distribution of nurses in Great Britain in 1851. Round your answer to nearest...
In 2009, Canadas population reached 33,710,000, a level that was 10.56% higher than ten years earlier. Rounded to the nearest 10,000, what was the population figure for 1999?
Two mutually exclusive investment alternatives are being considered. Alternative A requires an initial investment of $20,000 in a machine. Annual operating and maintenance costs are anticipated to be...
As a percent of national income, taxes in the United States are a. higher than in France, Germany, and the United Kingdom. b. lower than in France, Germany, and the United Kingdom. c. higher than in...
Route 66 is a toll road that is congested only during rush hour. During other times of day, the use of the highway is not _________, so the efficient toll is _________. a. excludable; higher b....
Common resources are a. efficiently provided by market forces. b. underprovided in the absence of government. c. overused in the absence of government. d. a type of natural monopoly.
Indicate whether the following managerial policy increases the risk of a death spiral:Use of low operating leverage for productionGroup of answer choicesTrueFalse
It is typically inappropriate to include the costs of excess capacity in product prices; instead, it should be written off directly to an expense account.Group of answer choicesTrueFalse
Firms can avoid the death spiral by excluding excess capacity from their activity bases. Group of answer choicesTrueFalse

Suppose that the money demand function is where r is the interest rate in percent. The money

Question:

(M/P) 800 50r, - : =

Step by Step Answer:

This question has not been answered yet.

Macroeconomics

Students also viewed these Business questions