Question

7. Suppose the goods market is at the equilibrium. Which of the following events will cause the largest 1 increase in output? Hint: Y = Co +I+G - 1-o G-61] A. T decreases by 10 B. I increases by 10 C. G increases by 5 D. both A and B. E. both A and C. F. both B and C. 8. The interest rate will increase as a result of which of the following events? A. An increase in income B. An open market purchase of bonds by the central bank C. A reduction in income D. All of the above E. None of the above Use the following information to answer questions (9)-(10). Consider the basic model of interest rate determination in Chapter 4. Suppose we have: M” = $Y L(i) and MS = M where L(i) = (0.5 - 5i), M = 100, and $Y = 400. 9. What is the equilibrium rate of interest? A. 0.025 or 2.5% B. 0.05 or 5% C. 0.075 or 7.5% D. 0.10 or 10% E. 0.10 or 12.5% 10. By how much should the money supply change if the Fed wants the interest rate to become 2%? A. The Money supply would have to increase from 100 to 120. B. The Money supply would have to increase from 100 to 160. C. The Money supply would have to decrease from 100 to 80. D. The Money supply would have to decrease from 100 to 60. E. No change needed because that's already the equilibrium interest rate.

Answer 1

(15 2ندن ندارد :ز »2 M = MS = (ناولى : 400 (5.5 - 5 ) = N دی 2 1 = أجه2 س = (۵۰) مه2 2M من به 2 N N = 165 Money supply would have to increw from las to 860 Answer: Optiun (B)