2. Suppose the following assumptions hold: o The public holds 40% of their money in the...
2. Suppose the following assumptions hold: o The public holds 40% of their money in the form of currency. o The ratio of reserves to deposits is 0.1. o The demand for money is given by: Md = $Y (0.8 – 4i) Initially, the monetary base is 460 billion, and nominal income is 2500 billion.
(a) What is the demand for high-powered money?
(b) Find the equilibrium interest rate by setting the demand for high-powered money equal to the supply of high-powered money.
(c) What is the overall supply of money? Is it equal to the overall demand for money at the interest rate you found in (b)?
(d) Calculate the impact on the interest rate if high-powered money is increased to 690 billion.
Homework Answers
![4) High poward momey is monetory base = ubo Billima 14 b) end = y 10.8- bij D ai 2500 killin 10.8-49] QUI 460 - ubo 0,8 – 4](http://img.homeworklib.com/questions/37f823d0-c038-11eb-bf8f-23795b7be693.png?x-oss-process=image/resize,w_560)
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2. Suppose the following assumptions hold: o The public holds
40% of their money in the...
Assume thefollowing: i. The public holds no currency. ii. The ratio of reserves to deposits (theta...
Assume thefollowing: i. The public holds no currency. ii. The ratio of reserves to deposits (theta ) is 0.08 . iii. The demand for money is given by Upper M Superscript d Baseline equals $Y left parenthesis 0.87 minus 2.1 i right parenthesis . If the monetary base is $83 billion and nominal income is $5.7 trillion,the equilibrium interest rate will be nothing %. (Round your response to two decimal places.)
MacroEconomics - Can someone answer these questions please? Part II, Problems Please write your answers as CLEARLY as p...
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MacroEconomics - Can someone answer these questions please?
Part II, Problems Please write your answers as CLEARLY as possible. Illegible answers may lose points. 16. Assume that i) the public holds no currency, ii) the reserve ratio is 8%. The demand for money is given by 1rl = SY(0.8-41) Initially, the monetary base H - $100 billion, and nominal income is $4.000 billion. a. What is the demand for central bank moncy? b. Calculate the equilibrium interest rate. c. What...
Scenario: Holding Cash Suppose that the public holds 50% of the money supply in currency and the reserve ratio is 20 percent. Banks hold no excess reserves. A customer deposits $6000 in her chequeable deposit. 5. (Scenario: Holding Cash) The money multiplier is: a equal to 2 b.greater than 5. c 0 equal to 5. d loss than 5
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