c) Suppose that the central bank doubles the money supply to 900. Draw a diagram, and explain in words what will happen. Find the new values of Y, r, and 1. d) Suppose now the money demand relationship was instead given by Mp 2Y - 50r What value of the money supply would result in the same outcome for Y and r that was obtained in part b)? Suppose the central bank initially sets the money supply at this value but then doubles it. What is the increase in Y that results from this doubling? Why do you think it is greater than the increase in Y that resulted from doubling the money supply in part c)?

c) Suppose that the central bank doubles the money supply to 900. Draw a diagram, and explain in words what will happen. Find the new values of Y, r, and 1. d) Suppose now the money demand relationship was instead given by Mp 2Y - 50r What value of the money supply would result in the same outcome for Y and r that was obtained in part b)? Suppose the central bank initially sets the money supply at this value but then doubles it. What is the increase in Y that results from this doubling? Why do you think it is greater than the increase in Y that resulted from doubling the money supply in part c)?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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