1.What are the two types of demand for money?

2.Explain how the GDP and the interest rate are related to the transactions and asset demands

for money.

3.The price of a bond with no expiration date is $1000 and its fixed annual interest payment is $50; bond annual rate of interest is 5%.

(a)If the price of this bond decreases by $250 to $750, what will its effective interest rate be for the new buyer?

(b)If the price of this bond increases to $1200, what will its effective interest rate be for the new buyer?

4.Suppose that a bond having no expiration date has a face value of $10,000 and pays a fixed amount of interest of $1000 annually. Compute and enter in the spaces provided either theeffective interest rate which a bond buyer could receive at the new price or the bond price (rounded to the nearest $1000) required to receive the interest rate shown.

part (a), complete the table to sho terest. Interes Asset Total t rate deman deman (in %) d d (billion (billion s) S) 10 S 40 B 80 120 160 of if the money supply is $ 1.080 billion what