Using the table below, answer the questions below about the market for money: Nominal Interest Rate Money Demanded (Trillion $) 10% $0.00 9% $1.00 8% $2.00 7% $3.00 6% $4.00 5% $5.00 4% $6.00 3% $7.00 2% $8.00 a. Construct a graph of the market for money using the table above, where the money supply is $5 trillion. What is the equilibrium nominal interest rate? b. If the federal reserve wants to target a nominal interest rate of 6% will they have to increase or decrease the money supply? What will the new money supply be?
Using the table below, answer the questions below about the market for money: Nominal Interest Rate Money Demanded (Trillion $) 10% $0.00 9% $1.00 8% $2.00 7% $3.00 6% $4.00 5% $5.00 4% $6.00 3% $7.00 2% $8.00 a. Construct a graph of the market for money using the table above, where the money supply is $5 trillion. What is the equilibrium nominal interest rate? b. If the federal reserve wants to target a nominal interest rate of 6% will they have to increase or decrease the money supply? What will the new money supply be?
Chapter16: Monetary Policy
Section: Chapter Questions
Problem 15SQ
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Question
- Using the table below, answer the questions below about the market for money:
|
Nominal Interest Rate |
Money Demanded (Trillion $) |
|
10% |
$0.00 |
|
9% |
$1.00 |
|
8% |
$2.00 |
|
7% |
$3.00 |
|
6% |
$4.00 |
|
5% |
$5.00 |
|
4% |
$6.00 |
|
3% |
$7.00 |
|
2% |
$8.00 |
|
|
|
a. Construct a graph of the market for money using the table above, where the money supply is $5 trillion. What is the equilibrium nominal interest rate?
b. If the federal reserve wants to target a nominal interest rate of 6% will they have to increase or decrease the money supply? What will the new money supply be?
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