Now suppose that the Central Bani: has set the current Money Supply to be equal to $8,000. This Money Supply is currently made up of
Now suppose that the Central Bani: has set the current Money Supply to be equal to $8,000. This Money Supply is currently made up of $2,000 of printed currency, and $6,000 of Bank Deposits. The current mandated reserve ratio is 10%. The Demand for Money (MD) as a function of the interest rate (\"i\") is given by: MD = 20,000 - 1,000i 5. Draw the MS and MD curves in a single figure. Label all nut-intercepts and y-intercepts. Where is the equilibrium in the money market? Given this, what is the current prevailing market interest rate 0*}? [4 points]
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