Answered: Nominal interest rate (percent per…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

In the graph you've just explored, is the money market in equilibrium if the interest rate is 4 percent per year? _______. The quantity of money demanded is _______ trillion and the quantity of money supplied is _______ trillion, so there is _______.

A. Yes; $10; $10; an equilibrium

B. No; $11; $9; an excess demand of $2 trillion

C. No; $9; $11; an excess supply of $2 trillion

Nominal interest rate (percent per year)
Nominal
interest rate 7.0
(percent)
6.0
5.0
4.00 4.0
9
MS
Central bank targets: Quantity of money O
Monetary base
Excess demand for
money. People sell
bonds and the
interest rate rises
MD
10
11
12
Quantity of money (trillions of dollars)

Definition Video Formula Definition Phenomenon in which market supply and demand balance each other. Market equilibrium is the economic state in which the market demand curve intersects the market supply curve, giving us the equilibrium price and equilibrium quantity for which a commodity can be sold and purchased in an economy. When market equilibrium is achieved, it suggests that all resources have been allocated efficiently and that there is just a distribution of income and resources in the economy. Video Formula

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