Suppose that money demand is given by where $Y is $100. Also, suppose that the supply of
Question:
Suppose that money demand is given by
where $Y is $100. Also, suppose that the supply of money is $20.
a. What is the equilibrium interest rate?
b. If the Federal Reserve Bank wants to increase the equilibrium interest rate i by 10 percentage points from its value in part a, at what level should it set the supply of money?
Transcribed Image Text:
Md = $Y(0.25 -1)
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