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3.Suppose the Baumol-Tobin model of money demand is correct. Everyone is alike and earn money income...
1.Suppose the Baumol-Tobin model of money demand is correct. Everyone is alike and earns money income...
1.Suppose the Baumol-Tobin model of money demand is correct. Everyone is alike and earns money income of $30,000/year. Brokers charge a fee of $2 for every transaction. The money supply is $1000 per person. What is the equilibrium nominal interest rate?Suppose the Fed wants to reduce the interest rate to 2% (.02). How much of an increase in the money supply per person is necessary to do so?2. In the Baumol-Tobin model, show that the optimal solution entails equality between...
This is all I got given. 2. Let's try to apply the Baumol-Tobin model to your day to day life. a. How much do you buy p...
This is all I got given.
2. Let's try to apply the Baumol-Tobin model to your day to day life. a. How much do you buy per year with currency (as opposed to checks or credit cards)? This is your value of Y. b. How long does it take you to go to the bank and get cash out? What is your hourly wage? Use these two figures to compute your value of F, or try to estimate your total...
Suppose that the money demand function is (M/ P)^d = 1000-100r where r is the interest...
Suppose that the money demand function is (M/ P)^d = 1000-100r where r is the interest rate in percent. The money supply M is 1000 and the price level P is 2.(a) Graph the supply and demand for real money balances.(b) What is the equilibrium interest rate?(c) Assume the price level is xed. What happens to the equilibrium interest rate if the supply of money is raised from 1000 to 1200?(d) If the Fed wishes to raise the interest rate...
Suppose that income elasticity of money demand is 0.8 and the interest rate elasticity of money...
Suppose that income elasticity of money demand is 0.8 and the interest rate elasticity of money demand is zero. Suppose that the central bank increases the money supply by 10% and real income increases by 3%. Assuming that the real interest rate is 4%, what will be the equilibrium nominal interest rate? (a) 10%. (b) 11.6%. (c) 7.6%. (d) 12.4%.
Aggregate Demand I - Work It Out: Question 2 Suppose that the money demand function is...
Aggregate Demand I - Work It Out: Question 2 Suppose that the money demand function is + = 600 – 757 where r is the interest rate in percent. The money supply M is $1500, and the price level P is fixed at 5. Round answers to one place after the decimal when necessary. c. What happens to the equilibrium interest rate, r, if the supply of money is raised from $1500 to $1350? % d. If the central bank...
10. Suppose that income elasticity of money demand is 0.8 and the interest rate elasticity of...
10. Suppose that income elasticity of money demand is 0.8 and the interest rate elasticity of money demand is zero. Suppose that the central bank increases the money supply by 10% and real income increases by 3%. Assuming that the real interest rate is 4%, what will be the equilibrium nominal interest rate? (a) 10%. (b) 11.6% (e) 7.6%. (d) 12.4%
Suppose that the money demand function takes the form If output grows at rate and the...
Suppose that the money demand function takes the form If output grows at rate and the nominal interest rate is constant, at what rate will the demand for real balances grow? What is the velocity of money in this economy? If inflation and nominal interest rates are constant, at what rate, if any, will velocity grow? How will a permanent (once-and-for-all) increase in the level of interest rates affect the level of velocity? How will it affect the subsequent growth...
Aggregate Demand I — Work It Out: Question 2 Suppose that the money demand function is...
Aggregate Demand I — Work It Out: Question 2 Suppose that the money demand function is c. What happens to the equilibrium interest rate, r, if the supply of money is raised from $1200 to $1350? M" = 600 – 757 % where r is the interest rate in percent. The money supply M is $1200, and the price level P is fixed at 4. Round answers to one place after the decimal when necessary. d. If the central bank...
Suppose that the money demand function is M tin Credit = 600 - 75 D wherer...
Suppose that the money demand function is M tin Credit = 600 - 75 D wherer is the interest rate in percent. The money supply M is $1200, and the price level Pjs fixed at 4. Round answers to one place after the decimal when necessary. sation Credit c. What happens to the equilibrium interest rate. r. if the supply of money is raised from $1200 to $9759 d. If the central bank wants the interest rate to be 7.0...
Suppose a bond pays annual interest of $200. Compute the interest rate per year that a bondholder can earn for each face value in the following table. Face Value (Dollars) 1,000 2,000 4,000 Interes...
Suppose a bond pays annual interest of $200. Compute the interest rate per year that a bondholder can earn for each face value in the following table. Face Value (Dollars) 1,000 2,000 4,000 Interest Rate per Year (Percentage) If the annual interest paid stays the same and the face value of the bond goes up, then the interest rate paid for the bond per year The following table shows the quantity of money supplied and the quantity of money demanded...
This is all I got given.
2. Let's try to apply the Baumol-Tobin model to your day to day life. a. How much do you buy per year with currency (as opposed to checks or credit cards)? This is your value of Y. b. How long does it take you to go to the bank and get cash out? What is your hourly wage? Use these two figures to compute your value of F, or try to estimate your total...
Aggregate Demand I - Work It Out: Question 2 Suppose that the money demand function is + = 600 – 757 where r is the interest rate in percent. The money supply M is $1500, and the price level P is fixed at 5. Round answers to one place after the decimal when necessary. c. What happens to the equilibrium interest rate, r, if the supply of money is raised from $1500 to $1350? % d. If the central bank...
10. Suppose that income elasticity of money demand is 0.8 and the interest rate elasticity of money demand is zero. Suppose that the central bank increases the money supply by 10% and real income increases by 3%. Assuming that the real interest rate is 4%, what will be the equilibrium nominal interest rate? (a) 10%. (b) 11.6% (e) 7.6%. (d) 12.4%
Aggregate Demand I — Work It Out: Question 2 Suppose that the money demand function is c. What happens to the equilibrium interest rate, r, if the supply of money is raised from $1200 to $1350? M" = 600 – 757 % where r is the interest rate in percent. The money supply M is $1200, and the price level P is fixed at 4. Round answers to one place after the decimal when necessary. d. If the central bank...
Suppose that the money demand function is M tin Credit = 600 - 75 D wherer is the interest rate in percent. The money supply M is $1200, and the price level Pjs fixed at 4. Round answers to one place after the decimal when necessary. sation Credit c. What happens to the equilibrium interest rate. r. if the supply of money is raised from $1200 to $9759 d. If the central bank wants the interest rate to be 7.0...
Suppose a bond pays annual interest of $200. Compute the interest rate per year that a bondholder can earn for each face value in the following table. Face Value (Dollars) 1,000 2,000 4,000 Interest Rate per Year (Percentage) If the annual interest paid stays the same and the face value of the bond goes up, then the interest rate paid for the bond per year The following table shows the quantity of money supplied and the quantity of money demanded...
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