et = $10 billion at 12 percent interest, increasing by $10 billion for each 2-percentage-point fa rest rate. ructions: Enter your answers as a whole number. 'hat is the equilibrium interest rate in Trance? |percent t the equilibrium interest rate, what are the quantity of money supplied, the quantity of mone anded, the amount of money demanded for transactions, and the amount of money demane et in Trance? Quantity of money supplied = $| | billion Quantity of money demanded = $| | billion amount of money demanded for transactions = $ | | billion

et = $10 billion at 12 percent interest, increasing by $10 billion for each 2-percentage-point fa rest rate. ructions: Enter your answers as a whole number. 'hat is the equilibrium interest rate in Trance? |percent t the equilibrium interest rate, what are the quantity of money supplied, the quantity of mone anded, the amount of money demanded for transactions, and the amount of money demane et in Trance? Quantity of money supplied = $| | billion Quantity of money demanded = $| | billion amount of money demanded for transactions = $ | | billion

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

Chapter16: Monetary Policy

Section: Chapter Questions

Problem 2SQP

See similar textbooks

Similar questions

Assume that the following data characterize a hypothetical economy: money supply = $200 billion; quantity of money demanded for transactions = $150 billion; quantity of money demanded as an asset = $10 billion at 12 percent interest, increasing by $10 billion for each 2-percentage-point fall in the interest rate.a. What is the equilibrium interest rate? Explain.b. At the equilibrium interest rate, what are the quantity of money supplied, the total quantity of money demanded, the amount of money demanded for transactions, and the amount of money demanded as an asset?
1. Suppose that the economy has the following money supply and demand equations: Money Supply: M = 8000Money Demand: M= 10,000 – 40,000rwhere money is in billions of dollars and interest rates, r , is written as a decimal(e.g., an interest rate of 10% would be written as .1 in the equation).A. Determine the equilibrium interest rate and quantity of money.B. What will happen in the money market if the interest rate is currently 10%?What is the amount of excess supply of or excess demand for money?C. Show in graph that at this interest rate (10%) there is disequilibrium in themoney market.
2. Suppose that money demand is given by M' =$Y(0.25 – i), where SY is 100. Also, suppose that the supply of money is $20. The equilibrium interest rate is _ If the central bank wants to increase i by 10 percentage points (e.g. from 2% to 12%, the actual interest rate depends on result you calculate), it should set the supply of money at
Assume that the following data characterize the hypothetical economy of Trance: money supply = $210 billion; quantity of money demanded for transactions = $160 billion; quantity of money demanded as an asset = $10 billion at 12 percent interest, increasing by $10 billion for each 2-percentage-point fall in the interest rate. Instructions: Enter your answers as a whole number. a. What is the equilibrium interest rate in Trance? percent b. At the equilibrium interest rate, what are the quantity of money supplied, the quantity of money demanded, the amount of money demanded for transactions, and the amount of money demanded as an asset in Trance? Quantity of money supplied = $ billion Quantity of money demanded = $ billion Amount of money demanded for transactions = $ billion Amount of money demanded as an asset = $ billion
What is the basic determinant of ( a ) the transactions demand and (b) the asset demand for money? Explain how these two demands can be combined graphically to determine total money demand. How is the equilibrium interest rate in the money market determined? Use a graph to show the impact of an increase in the total demand for money on the equilibrium interest rate (no change in money supply). Use your general knowledge of equilibrium prices to explain why the previous interest rate is no longer sustainable.
Suppose that the economy has the following money supply and demand equations: Money Supply: M = 8000Money Demand: M= 10,000 – 40,000rwhere money is in billions of dollars and interest rates, r , is written as a decimal(e.g., an interest rate of 10% would be written as .1 in the equation).A. Determine the equilibrium interest rate and quantity of money.B. What will happen in the money market if the interest rate is currently 10%?
Suppose that the economy has the following money supply and demand equations: Money Supply: M = 8000Money Demand: M= 10,000 – 40,000rwhere money is in billions of dollars and interest rates, r , is written as a decimal(e.g., an interest rate of 10% would be written as .1 in the equation).A. Determine the equilibrium interest rate and quantity of money.B. What will happen in the money market if the interest rate is currently 10%?What is the amount of excess supply of or excess demand for money?C. Show in graph that at this interest rate (10%) there is disequilibrium in themoney market.2. Assume that a particular bank has excess reserves of Php800,000 and checkabledeposits of Php1,500,000. If the reserve ratio is 20%, what is the size of the bank’sactual reserves?3. Suppose that GRAB Bank is a newly created bank in your hometown. Consider thefollowing transactions: Owners of the bank sold shares of stocks to the public (which includes owners’equity) amounting to P1,000,000. To fully…
Assume that the following data characterize the hypothetical economy of Trance: money supply $200 billion; quantity of money demanded for transactions $150 billion; quantity of money demanded as an asset $10 billion at 12 percent interest, increasing by $10 billion for each 2-percentage-point fall in the interest rate. Instructions: Enter your answers as whole numbers. a. What is the equilibrium interest rate in Trance? b. At the equilibrium interest rate, what are the quantity of money supplied, the total quantity of money demanded, the amount of money demanded for transactions, and the amount of money demanded as an asset in Trance? billion. Quantity of money supplied billion. Quantity of money demanded billion. Amount of money demanded for transactions billion. Amount of money demanded as an asset
Suppose that the Money Supply is currently at $13,000, and that Money Demand is given by: MD= 23,000 - 2,000r where r is the interest rate, and for the purposes of the functional form above, if the interest rate = 8%, the r = 8 for derterming MD. Suppose that we start in equilibrium in the money market and the Central Bank targets the interest rate. If the Central Bank raises the interest rate by 2%, then how large will the surplus in the Money Market be if the Central Bank does not adjust the Money Supply (MS)? Note: round your answer to two decimal places. Also, if the answer is $2,678 for example, input this as 2678.00
What would happen to the equilibrium interest rate if (A) total household wealth decreases; (B) covenants on borrowing become less restrictive; (C)the Federal Reserve increases the money supply? Explain. (Hint: you might want to draw the supply-demand diagram to help your explanation).
Suppose the money market for some hypothetical economy is given by the following graph, which plots the money demand and money supply curves. Assume the central bank in this economy (the Fed) fixes the quantity of money supplied. Suppose the price level decreases from 150 to 125. Shift the appropriate curve on the graph to show the impact of a decrease in the overall price level on the market for money. ? INTEREST RATE (Percent) 12 10 2 0 0 15 Money Supply Money Demand 30 45 60 MONEY (Billions of dollars) 75 90 Money Demand Money Supply
What would happen to the equilibrium interest rate if (A) total household wealth decreases; (B) covenants on borrowing become less restrictive; (C)the Federal Reserve increases the money supply? Explain. (Hint: you might want to draw the supply - demand diagram to help your explanation).