Assume that the following data characterize a hypothetical economy: money supply = $100 billion; quantity of money demanded for transactions = $55 billion; quantity of money demanded as an asset = $20 billion at 14 percent interest, increasing by $5 billion for each 2-percentage point fall in the interest rate. a) What is the equilibrium interest rate? Equilibrium interest rate = 0% b) At the equilibrium interest rate, what is the quantity of money supplied? Money supplied = $0 billion c) At the equilibrium interest rate, what is the total quantity of money demanded? Money demanded = $0 billion d) At the equilibrium interest rate, what is the quantity of money demanded for transactions? Money demanded for transactions = $0 billion e) At the equilibrium interest rate, what is the quantity of money demanded as an asset? Money demanded as an asset = $0 billion
Assume that the following data characterize a hypothetical economy: money supply = $100 billion; quantity of money demanded for transactions = $55 billion; quantity of money demanded as an asset = $20 billion at 14 percent interest, increasing by $5 billion for each 2-percentage point fall in the interest rate. a) What is the equilibrium interest rate? Equilibrium interest rate = 0% b) At the equilibrium interest rate, what is the quantity of money supplied? Money supplied = $0 billion c) At the equilibrium interest rate, what is the total quantity of money demanded? Money demanded = $0 billion d) At the equilibrium interest rate, what is the quantity of money demanded for transactions? Money demanded for transactions = $0 billion e) At the equilibrium interest rate, what is the quantity of money demanded as an asset? Money demanded as an asset = $0 billion
Chapter26: Monetary Policy
Section: Chapter Questions
Problem 4SQP
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