Question

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 for various interest rates Demand for Money (Billions of dollars) 50 150 250 350 450 Supply of Money (Billions of dollars) 250 250 250 250 250 Interest Rate (Percent) 13 9 The following graph depicts the money supply curve in orange. On the graph, use the blue points (circle symbol) to graph the money demand, and the black point (plus symbol) to signify the initial equilibrium point in the market. Next, shift the money supply curve to show the affects of a $100 billion decrease in the money supply. Then, plot the point corresponding to the new equilibrium point using the purple point (diamond symbol 15 14 13 12 MS MS 10 Money Demand Equilibrium Equilibrium2 0 50 00 200 250 300 350 400 450 500 QUANTITY (Billions of dollars) Before the Fed decreased the money supply, the equilibrium interest rate was 1% The Fed decreased the money supply by $100 billion. This results in a shortage of money in the system, so peoplebonds. Because of this the interest rate in the economy The new equilibrium rate of interest is now

Answer 1