a. If money supply is increased by 15, what will be the new interest rate? Round your answers to one decimal place. Pabst: Kokanee: b. What will be the increase in investment spending as a result of this new interest rate? Pabst: Kokanee: % Pabst: c. If the multiplier is 3 in each economy, what will be the increase in GDP? Kokanee: %
a. If money supply is increased by 15, what will be the new interest rate? Round your answers to one decimal place. Pabst: Kokanee: b. What will be the increase in investment spending as a result of this new interest rate? Pabst: Kokanee: % Pabst: c. If the multiplier is 3 in each economy, what will be the increase in GDP? Kokanee: %
Macroeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506756
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter9: An Introduction To Basic Macroeconomic Markets
Section: Chapter Questions
Problem 12CQ
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Question
![The graph below illustrates the money demand and investment demand for the economies of Pabst and Kokanee.
Interest rate
Interest rate
15
13
11
9
5
3
1
15
13
11
9
5
3
1
70
60
80
70
90
80
100 110 120
Quantity of money
90 100 110 120
Quantity of money
MD
MS
MS
MD
Pabst
Interest rate
Kokanee
Interest rate
12
10
8
6
4
12
11
10
9
8
6
5
4
3
0
0
10
10
20
30 40 50 60
Quantity of investment
20 30 40
Quantity of investment
50
70
4
(60,8)
60](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F41a11f92-ec66-4681-9866-6ecb7ea598eb%2F6f6455e0-73df-416f-bfc6-9331fcc42a70%2Ffqpzdfh_processed.png&w=3840&q=75)
Transcribed Image Text:The graph below illustrates the money demand and investment demand for the economies of Pabst and Kokanee.
Interest rate
Interest rate
15
13
11
9
5
3
1
15
13
11
9
5
3
1
70
60
80
70
90
80
100 110 120
Quantity of money
90 100 110 120
Quantity of money
MD
MS
MS
MD
Pabst
Interest rate
Kokanee
Interest rate
12
10
8
6
4
12
11
10
9
8
6
5
4
3
0
0
10
10
20
30 40 50 60
Quantity of investment
20 30 40
Quantity of investment
50
70
4
(60,8)
60
![a. If money supply is increased by 15, what will be the new interest rate? Round your answers to one decimal place.
Pabst:
Kokanee:
b. What will be the increase in investment spending as a result of this new interest rate?
Pabst:
Kokanee:
%
Kokanee:
%
c. If the multiplier is 3 in each economy, what will be the increase in GDP?
Pabst:
d. In which economy would monetary policy be more effective in closing a recessionary gap?
(Click to select)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F41a11f92-ec66-4681-9866-6ecb7ea598eb%2F6f6455e0-73df-416f-bfc6-9331fcc42a70%2Fpivj1t_processed.png&w=3840&q=75)
Transcribed Image Text:a. If money supply is increased by 15, what will be the new interest rate? Round your answers to one decimal place.
Pabst:
Kokanee:
b. What will be the increase in investment spending as a result of this new interest rate?
Pabst:
Kokanee:
%
Kokanee:
%
c. If the multiplier is 3 in each economy, what will be the increase in GDP?
Pabst:
d. In which economy would monetary policy be more effective in closing a recessionary gap?
(Click to select)
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