Homework Answers
Answer 5.
a. Money supply falls from $150 to $100
b. New Equilibrium interest rate =7%.
At i=7%, Md and MS2 meet.
c. Investment DECREASES by $50 billion
reason- Old investment level at i=5% was $100 billion
New investment level at i=7% is $50 billion
Decrease in investment= $100-$50=$50 billion
Note-According to HOMEWORKLIB RULES first question can be answered
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