Question
Refer to the table for Moola below to answer the following questions. Money Supply Money Demand Interest Rate Investment at Interest (Rate Shown) Potential Real
Refer to the table for Moola below to answer the following questions.
Money Supply | Money Demand | Interest Rate | Investment at Interest (Rate Shown) | Potential Real GDP | Actual Real GDP at Interest (Rate Shown) |
---|---|---|---|---|---|
$ 500 | $ 800 | 2% | $ 50 | $ 350 | $ 390 |
500 | 700 | 3 | 40 | 350 | 370 |
500 | 600 | 4 | 30 | 350 | 350 |
500 | 500 | 5 | 20 | 350 | 330 |
500 | 400 | 6 | 10 | 350 | 310 |
Instructions: Enter your answers as a whole number. a. What is the equilibrium interest rate in Moola? ___________percent b. What is the level of investment at the equilibrium interest rate? __________$ c. Is there either a recessionary output gap (negative GDP gap) or an inflationary output gap (positive GDP gap) at the equilibrium interest rate and, if either, what is the amount? ______________of $___________ d. Given money demand, by how much would the Moola central bank need to change the money supply to close the output gap? ___________________the money supply by $_____________ e. What is the expenditure multiplier in Moola? __________________
The graph below is an illustration of the aggregate demand-aggregate supply model.
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