Assume that the following data characterize the hypothetical economy of Trance: money supply = $190 billion; quantity of money demanded for transactions = $140 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. see picture!!!
Assume that the following data characterize the hypothetical economy of Trance: money supply = $190 billion; quantity of money demanded for transactions = $140 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. see picture!!!
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Assume that the following data characterize the hypothetical economy of Trance: money supply = $190 billion; quantity of money demanded for transactions = $140 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.
see picture!!!

Transcribed Image Text:Assume that the following data characterize the hypothetical economy of Trance:
money supply = $190 billion; quantity of money demanded for transactions = $140
billion; quantity of money demanded as an asset = $10 billion at 12 percent interest,
increasing by $1o 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?
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.
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