E1 1. The total demand for money is equal to the transaction plus the asset demand formoney.a. If Nominal GDP is 2,100 billion, velocity is three. Transaction demand (Dt) isequal to?This means that transaction demand for money(%) of nominal GDP.will be equal tob. The following table shows asset demand values at each rate of interest. Fill in theDm values in the table, then graph the demand for money curve on the graphbelow (Dm1).(Dt + Da = Dm); you do not need to use the interest rate at this time.Interest rate16%14%12%10%8%6%4%$20$40$60$80$100$120$14010Dm1c. If the supply of money is 780 billion (Sm1), addthis to the graph. What is the equilibrium rateof interest?d. The supply of money increase to 800Billion (Sm2), add this to the graph. What is thenew equilibrium rate of interest?e. If nominal GDP increases by 120 billion, thetotal demand for money (Dm) would increaseby how much?Graph thischange (Dma). With this change, what wouldbe the new equilibrium interest ratesfor Smi?and Sma?interest rate(%)16 4 12 10864214700 720740760780 800 820 840Quantity of money demanded and supplied

Answered: Image /qna-images/answer/13ad352f-6e4f-402a-b369-dc6b654a40b6.jpg

1. The total demand for money is equal to the transaction plus the asset demand for money. a. If Nominal GDP is 2,100 billion, velocity is three. Transaction demand (Dt) is equal to? This means that transaction demand for money (%) of nominal GDP. will be equal to b. The following table shows asset demand values at each rate of interest. Fill in the Dm values in the table, then graph the demand for money curve on the graph below (Dm1). (Dt + Da = Dm); you do not need to use the interest rate at this time. Interest rate 16% 14% 12% 10% 8% 6% 4% D₁ $20 $40 $60 $80 $100 $120 $140 Dm1 c. If the supply of money is 780 billion (Smt), add this to the graph. What is the equilibrium rate of interest? d. The supply of money increase to 800 Billion (Sm2), add this to the graph. What is the new equilibrium rate of interest? e. If nominal GDP increases by 120 billion, the total demand for money (Dm) would increase by how much? Graph this change (Dma). With this change, what would be the new equilibrium interest rates for Smt? and Sma? Interest rate(%) 16 14 12 NARBONAS 10 4 2 700 720 740 760 780 800 820 840 Quantity of money demanded and succed

1. The total demand for money is equal to the transaction plus the asset demand for money. a. If Nominal GDP is 2,100 billion, velocity is three. Transaction demand (Dt) is equal to? This means that transaction demand for money (%) of nominal GDP. will be equal to b. The following table shows asset demand values at each rate of interest. Fill in the Dm values in the table, then graph the demand for money curve on the graph below (Dm1). (Dt + Da = Dm); you do not need to use the interest rate at this time. Interest rate 16% 14% 12% 10% 8% 6% 4% D₁ $20 $40 $60 $80 $100 $120 $140 Dm1 c. If the supply of money is 780 billion (Smt), add this to the graph. What is the equilibrium rate of interest? d. The supply of money increase to 800 Billion (Sm2), add this to the graph. What is the new equilibrium rate of interest? e. If nominal GDP increases by 120 billion, the total demand for money (Dm) would increase by how much? Graph this change (Dma). With this change, what would be the new equilibrium interest rates for Smt? and Sma? Interest rate(%) 16 14 12 NARBONAS 10 4 2 700 720 740 760 780 800 820 840 Quantity of money demanded and succed

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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