Calculate the equilibrium price and quantity of gold

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Suppose an economy uses gold as commodity money. Consider the market for gold with the following Demand for Gold as Money: GD;M = 80 – 1/4*V Demand for Gold for Nonmonetary use: GD;NM = 15 – 1/4*V Supply of gold: GS = 35 + 1/2*V where V is the price of gold, GD;M is the quantity demanded for money; GD;NM is the quantity demanded for nonmonetary use and GS is the quantity supplied of gold . a. Write the total demand equation for gold. b. Calculate the equilibrium price and quantity of gold. c. How much gold is used as money and how much gold is used for nonmonetary use? d. Suppose there is a natural disaster so that the new supply of gold is given: GS = 50 + 1/2*V. Determine the change in the quantity of gold used as money and the change in the quantity of gold for nonmonetary use.

Reference no: EM131009597

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