Money demand function-what is equilibrium interest rate

Assignment Help Business Economics

Reference no: EM13886653

Suppose that the money demand function is (M/P)d = 800 - 50r, where r is interest rate in percent. The money supply M is 2,000 and the price level P is fixed at 5. a. Graph the supply and demand for real money balances. b. What is equilibrium interest rate? c. What happens to the equilibrium interest rate if the supply of money is reduced from 2000 to 15000? d. If the central bank wants the interest rate to be 4 percent, what money supply should it set?

Reference no: EM13886653

Questions Cloud

Calculate euclids cost recovery deduction : Euclid acquires a 7-year class asset on May 9, 2015, for $80,000. Euclid does not elect immediate expensing fewer than 179. She does not claim any available additional first-year depreciation. Calculate Euclid's cost recovery deduction for 2015 and 2..

Explanation of role of storytelling in effective leadership : Explanation of the role of storytelling in effective leadership. Explain what leadership skills, including storytelling, are necessary in the Information Age compared to the Industrial Age

Find the speed of the car : A stationary motion detector sends out a sound wave of frequency f= 4.0-Hz towards an approaching car. The wave is reflected off the car and the reflected wave is picked up by the motion detector.

Description of the social construction of reality : Description of the "social construction of reality" through the lens of values, beliefs, and assumptions. Does a multicultural workforce need to conform fully to the same construction of reality? Provide examples to illustrate your position

Money demand function-what is equilibrium interest rate : Suppose that the money demand function is (M/P)d = 800 - 50r, where r is interest rate in percent. The money supply M is 2,000 and the price level P is fixed at 5. a. Graph the supply and demand for real money balances. b. What is equilibrium interes..

Currently deducts the mortgages interest on her tax return : Fran who is in the 35% tax bracket, recently collected $100,000 on a life insurance policy she carried for her father. She currently owes $120,000 on her personal residence and $120,000 on business property. What would be the tax consequences of each..

Explanation of memes and the characteristics : Explanation of memes and the characteristics by which they may be recognized. Evaluate which memes from your experience in your organization or community seem to be the most positive and the most dangerous. Provide examples to support your evaluat..

What happens to the optimal coinsurance rate : What happens to the optimal coinsurance rate β (insurance demand), if we vary policyholder's level of risk aversion? What happens to the optimal coinsurance rate β (insurance demand), if we vary policyholder's wealth w? What happens to the optimal co..

How much energy is stored in the capacitor : An emf of 12 V is connected to a series RC circuit consisting of a 3.4 × 10^6 ? resistor and a 3.2uF capacitor. The capacitor is initially uncharged. One second after the switch is closed, how much energy is stored in the capacitor?

User Account

All Pages