Figure 34-1 INTEREST RATE (Percent) 5.25 4.25 3.25 P MS QUANTITY OF MONEY Money Demand Refer to Figure 34-1. If the current interest rate is 3.25 percent, O people will sell more bonds, which drives interest rates up. O the quantity of money supplied is greater than the quantity of money demanded. there is an excess supply of money. as the money market moves to equilibrium, people will buy more goods.
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- The beautiful expert bro Hand written solution is not allowed.5. Fiscal policy, the money market, and aggregate demand Suppose there is some hypothetical economy in which households spend $0.50 of each additional dollar they earn and save the $0.50 they have left over. The following graph plots the economy's initial aggregate demand curve (AD)). Suppose now that the government increases its purchases by $2.5 billion. Use the green line (triangle symbol) on the following graph to show the aggregate demand curve (AD) after the multiplier effect takes place. Hint: Be sure the new aggregate demand curve (AD) is parallel to AD. You can see the slope of AD, by selecting it on the following graph. ? PRICE LEVEL 116 114 112 110 108 106 104 102 100 100 AD₁ 102 106 108 110 OUTPUT (Billions of dollars) 104 112 114 116 AD₂ AD₂Figure 15-1 Interest Rate 4% 3% 2% MS b d Money Demand Quantity of Money Refer to the Figure 15-1. At an interest rate of 4 percent, how much is the excess money demand or supply? There is an excess money supply equal to the distance between b and a. There is an excess money demand equal to the distance between a and b. There is an excess money demand equal to the distance between b and c. There is an excess money supply equal to the distance between c and b.
- • Suppose that a person’s wealth is $50,000 and that her yearlyincome is $60,000. Also suppose that her money demand functionis given by Md = $Y10.35 - i2Derive the demand for bonds. Suppose the interest rate increases by 10 percentage points. What is the effect on her demand for bonds?What are the effects of an increase in income on her demand for money and her demand for bonds? Explain in wordsUse the figure below to answer the following question(s): Rate of Interest (%) O OG OC OH Sm3 OD 00 Smi 10 Sm2 D Q3 Q₁ Q₂ Quantity of Money -Dmz -Dm1 Refer to the above graph which shows the supply and demand for money where Dm1, Dm2, and Dm3 represent different demands for money and Sm1, Sm2, and Sm3 represent different levels of the money supply. The initial equilibrium point is A. What will be the new equilibrium point following an increase in the money supply? -Dm3 Jhay GInterest Rate 4% 3 2. O2 percent 0 percent 4 percent a 3 percent MS b d Refer to Figure 15-1. At which interest rate is there an excess money supply? Money Demand Quantity of Money
- Assume that the following datea 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 assetThe following graph shows the money market in equilibrium at an interest rate of 6% and a quantity of money equal to $45 billion. Show the impact of the increase in government purchases on the interest rate by shifting one or both of the curves on the following graph.I dont know if I plotted the lines correclty and answered the questions right.
- Exercise 2 Suppose that money demand is given by MD= $Y(0.25 – i) where $Y is $100. Also, suppose that the supply of money is $20. a. What is the equilibrium interest rate? b. If the Federal Reserve Bank in the USA wants to increase i by 10 percentage points, at what level should it set the supply of money?The table below shows the amount of savings and borrowing in a market for loans to purchase homes, measured in millions of dollars, at various interest rates. InterestRate QuantitySupplied QuantityDemanded5% 98 2216% 129 1917% 160 1608% 178 1429% 196 12410% 214 106 What is the equilibrium interest rate and quantity of loaned funds? r = % Q = Suppose there is a decrease in demand of money, what will happen to interest rates and quantity? Increase in Interest Rates, Increase in Quantity?Increase in Interest Rates, Decrease in Quantity?Decrease in Interest Rates, Increase in Quantity?Decrease in Interest Rates, Decrease in Quantity?Answer everything in the photos including both of the graphs.