What is the equilibrium interest rate

Reference no: EM13901371

Suppose that money demand is given by

Md = $Y (.25 - i )

where $Y is $100. Also, suppose that the supply of money is $20.

a. What is the equilibrium interest rate?

b. If the Federal Reserve Bank wants to increase i by 10 per- centage points (e.g., from 2% to 12%), at what level should it set the supply of money?

Reference no: EM13901371

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