Reference no: EM132488685
Using the data in the table below, answer the following questions. (Hint: draw a graph when possible)
Interest Rate% Money Demand
(billions of dollars)
18 180
17 200
16 220
15 240
14 280
13 340
12 400
11 480
10 580
Assume that the money supply is equal to 240 (do not use % signs in your answers)
Part 1: What is the equilibrium rate of interest? _________
Part 2: Assume that the Bank of Canada buys bonds and increases the money supply to 400 What is the equilibrium rate of interest? _________
Part 3: A fall in income causes the demand for money to ________ by 60 billion. If the money supply is 160, what is the equilibrium rate of interest? _______
Part 4: Assuming the change in part 3, if money supply is 420, what is the equilibrium rate of interest? ______
Part 5: An increase in income causes the transaction demand for money to ________ by 40 billion at each interest rate. (Assume the change in part 3 did not occur. Given a money supply of 240, what is the equilibrium rate of interest? ________
Part 6: Given the change in part 5, if money supply is 380, what is the equilibrium rate of interest? ________