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LEARNING ASSESSMENT M3B PROBLEMS 1. For each of the following economic changes, predict what will happen to equilibrium interest rate and quantity of money in the financial market. Sketch a demand and supply diagram to support your answers. (Letter A is solved/ answered as a sample of how you are to present the answers for the remaining letters.) A. Gross domestic product (GDP) in the economy increases. MS, i, i, MD2 MD, Quantity of money Since GDP increase will cause an increase in money demand, this causes the equilibrium interest rate in the money market to rise. The equilibrium quantity of money is constant at Qu since MS is fixed. (Now do the rest of the problems.) B. The BSP changes its bank regulations in a way that makes it cheaper and easier for banks to make loans. C. People gain confidence that the economy is growing and that their jobs are secure. D. Banks that have made loans find that a larger number of people than they expected are not repaying those loans. E. Because of the pandemic, people become uncertain about their economic future. F. BSP buys dollars from the public to increase its foreign exchange reserves. 2. Suppose that Md = -80i + 0.7Y and that BSP fixes Ms at Php50 B and the national income is to be achieved at P80B. A. Determine the equilibrium interest rate and equilibrium quantity of money that is desirable so as not to cause any surplus or shortage of money. Show supporting calculation. B. Illustrate in a graph the money demand and supply and highlight the equilibrium noint

LEARNING ASSESSMENT M3B PROBLEMS 1. For each of the following economic changes, predict what will happen to equilibrium interest rate and quantity of money in the financial market. Sketch a demand and supply diagram to support your answers. (Letter A is solved/ answered as a sample of how you are to present the answers for the remaining letters.) A. Gross domestic product (GDP) in the economy increases. MS, i, i, MD2 MD, Quantity of money Since GDP increase will cause an increase in money demand, this causes the equilibrium interest rate in the money market to rise. The equilibrium quantity of money is constant at Qu since MS is fixed. (Now do the rest of the problems.) B. The BSP changes its bank regulations in a way that makes it cheaper and easier for banks to make loans. C. People gain confidence that the economy is growing and that their jobs are secure. D. Banks that have made loans find that a larger number of people than they expected are not repaying those loans. E. Because of the pandemic, people become uncertain about their economic future. F. BSP buys dollars from the public to increase its foreign exchange reserves. 2. Suppose that Md = -80i + 0.7Y and that BSP fixes Ms at Php50 B and the national income is to be achieved at P80B. A. Determine the equilibrium interest rate and equilibrium quantity of money that is desirable so as not to cause any surplus or shortage of money. Show supporting calculation. B. Illustrate in a graph the money demand and supply and highlight the equilibrium noint

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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MODULE 3: THE BANKING LAWS AND REGULATIONS LEARNING ASSESSMENT M3B PROBLEMS 1. For each of the following economic changes, predict what will happen to equilibrium interest rate and quantity of money in the financial market. Sketch a demand and supply diagram to support your answers. (Letter A is solved/ answered as a sample of how you are to present the answers for the remaining letters.) A. Gross domestic product (GDP) in the economy increases. MS, i, MD2 MD, Quantity of money Since GDP increase will cause an increase in money demand, this causes the equilibrium interest rate in the money market to rise. The equilibrium quantity of money is constant at Q since MS is fixed. (Now do the rest of the problems.) B. The BSP changes its bank regulations in a way that makes it cheaper and easier for banks to make loans. C. People gain confidence that the economy is growing and that their jobs are secure. D. Banks that have made loans find that a larger number of people than they expected are not repaying those loans. E. Because of the pandemic, people become uncertain about their economic future. F. BSP buys dollars from the public to increase its foreign exchange reserves. 2. Suppose that Md = -80i + 0.7Y and that BSP fixes Ms at Php50 B and the national income is to be achieved at P80B. A. Determine the equilibrium interest rate and equilibrium quantity of money that is desirable so as not to cause any surplus or shortage of money. Show supporting calculation. B. Illustrate in a graph the money demand and supply and highlight the equilibrium point.
Transcribed Image Text:MODULE 3: THE BANKING LAWS AND REGULATIONS LEARNING ASSESSMENT M3B PROBLEMS 1. For each of the following economic changes, predict what will happen to equilibrium interest rate and quantity of money in the financial market. Sketch a demand and supply diagram to support your answers. (Letter A is solved/ answered as a sample of how you are to present the answers for the remaining letters.) A. Gross domestic product (GDP) in the economy increases. MS, i, MD2 MD, Quantity of money Since GDP increase will cause an increase in money demand, this causes the equilibrium interest rate in the money market to rise. The equilibrium quantity of money is constant at Q since MS is fixed. (Now do the rest of the problems.) B. The BSP changes its bank regulations in a way that makes it cheaper and easier for banks to make loans. C. People gain confidence that the economy is growing and that their jobs are secure. D. Banks that have made loans find that a larger number of people than they expected are not repaying those loans. E. Because of the pandemic, people become uncertain about their economic future. F. BSP buys dollars from the public to increase its foreign exchange reserves. 2. Suppose that Md = -80i + 0.7Y and that BSP fixes Ms at Php50 B and the national income is to be achieved at P80B. A. Determine the equilibrium interest rate and equilibrium quantity of money that is desirable so as not to cause any surplus or shortage of money. Show supporting calculation. B. Illustrate in a graph the money demand and supply and highlight the equilibrium point.
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