Question

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 percent what money supply should it set? Money supply = $

Answer 1

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we have 6oo-750 М. р Q. c) what happent to the equilibrium if money is interest rate sa o raised from $1200 to $975 (Note Here money Supply decrease not raised, error may be a typo. But these does not a flect answer. IP = 4 M= 975 975 4 = 6oo - 758 243.75 = 600-750 ace 75ra 600-24 3.75 758= 356.25 8=356.25 75 8-4.1 o

if 8=7 P=4 M Goo-2758 el tion put value and re-arrang equa M Pl6oo- 758) M = 46 600 - 7541) M= 4 (6oo 525) Me 4 X 25 M = = 300 If have ask in you doubt any will reply Comment a sap. CS Scanned with CamScanner