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Equilibrium nominal interest rate

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Suppose the Baumol-Tobin model of money demand is correct. Everyone is alike and earns $30,000/year. Brokers charge a $2 fee for every transaction. The money supply is $1000 per person. What is the equilibrium nominal interest rate? Suppose the fed wants to reduce the interest rate to 2%. How much of an increase in money supply per person is necessary to do so?

Reference no: EM132284310

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