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Derive the demand for bonds

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Reference no: EM132473138

Suppose that a person's wealth is $50,000 and that her yearly income is $60,000. Also, suppose that her money demand function is given by:

Md =$Y(0.35 - i)

  1. Derive the demand for bonds. What is the effect of an increase in the interest rate of 10% (from, say, 2% to 12%) on the demand for bonds?
  2. What are the effects of an increase in wealth on money demand and on bond demand?
  3. What are the effects of an increase in income on money demand and on bond demand?

Reference no: EM132473138

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