u10. Using the demand and supply schedule for money shown below, do the following: a)Graph the demand for and the supply of money curves. b)Determine the equilibrium interest rate. c)Suppose the RBA decreases the money supply by $5 billion. Show the effect in your graph and describe the money market adjustment process that is likely to follow. What is the new equilibrium rate of interest? Interest rate (%) Demand for money (billions of dollars) Supply of money (billions of dollars) 4 10 30 3 20 30 2 30 30 1 40

ENGR.ECONOMIC ANALYSIS
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u10. Using the demand and supply schedule for money shown below, do the following:

a)Graph the demand for and the supply of money curves.

b)Determine the equilibrium interest rate.

c)Suppose the RBA decreases the money supply by $5 billion. Show the effect in your graph and describe the money market adjustment process that is likely to follow. What is the new equilibrium rate of interest?

Interest rate (%)

Demand for money

(billions of dollars)

Supply of money

(billions of dollars)

4

10

30

3

20

30

2

30

30

1

40

30

 

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