Consider the Money Multiplier and assume the following: i. The public holds no currency (c = 0)
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Question:
Consider the Money Multiplier and assume the following:
i. The public holds no currency (c = 0)
ii. the ratio of reserves to deposits is 0.1 (= 0.1)
iii. The demand for money is given by Md=Y(0.8-4i)
Initially the monetary base is 100 billion and nominal income (Y) is 5000 billion.
Find the equilibrium interest rate (by setting the demand for central bank money equal to the supply of central bank money). Please provide your answer in percentage points (with a number between 0 and 100)
I don't understand how you actually get the interest rate answer from formulas
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