Suppose the economywide demand for money is given by: M = P(0.3Y − 25,000i). The price level P equals 3, and real output Y equals 8,000. a. At what value should the Fed set the nominal money supply if it wants to set the nominal interest rate at 2 percent? The nominal money supply should be set at $ . b. At what value should the Fed set the nominal money supply if it wants to set the nominal interest rate at 3 percent? The nominal money supply should be set at $ .
Suppose the economywide demand for money is given by: M = P(0.3Y − 25,000i). The price level P equals 3, and real output Y equals 8,000. a. At what value should the Fed set the nominal money supply if it wants to set the nominal interest rate at 2 percent? The nominal money supply should be set at $ . b. At what value should the Fed set the nominal money supply if it wants to set the nominal interest rate at 3 percent? The nominal money supply should be set at $ .
Chapter13: Monetary Policy
Section: Chapter Questions
Problem 6E
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Suppose the economywide demand for money is given by: M = P(0.3Y − 25,000i). The price level P equals 3, and real output Y equals 8,000.
a. At what value should the Fed set the nominal money supply if it wants to set the nominal interest rate at 2 percent?
The nominal money supply should be set at $ .
b. At what value should the Fed set the nominal money supply if it wants to set the nominal interest rate at 3 percent?
The nominal money supply should be set at $ .
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