The algebric form of demand for money as a function of bond and checking account interest rates.

Question

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Answer 1

Question

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

Chapter 7, Problem 3NP

a)

To determine

To write: The algebric form of demand for money as a function of bond and checking account interest rates.

a)

Expert Solution

Answer to Problem 3NP

The equation for Person M’s money demand is Md=$50000−$500000(i−im) .

Explanation of Solution

Given information:

Value of bonds = $50000

2ⁿ^d bond = $5000

Net wealth = Total wealth − Amount invested.

For second bond, interest rate is more compared to checking account.

So to complete the formula, subtract $50000 and the formula $5000(i−im)100 from $100000 . This is done because $50000 is invested and $5000 is value of bond which gives interest .

So, Demand for money is,

Md=$100000−$50000−$5000(i−im).100

Md=$50000−$500000(i−im)

Value of bond = $5000

Interest rate on bond = i

Interest rate on checking account = i^m

In percentage form, value of bond is written as $5000(i−im)

Hence the equation for Person M’s money demand is Md=$50000−$500000(i−im) .

Economics Concept Introduction

Introduction:

Equilibrium in asset market occurs when demand of money is equal to supply of money.

b)

To determine

To write: The algebric formula of demand for bonds.

b)

Expert Solution

Answer to Problem 3NP

Algebric formula of demand for bonds is Bd=$50000+$500000(i−im)

Explanation of Solution

Person M’s demand for bonds is simply the sum of the amount of his money that is wanted for investment in bonds, $50000 and $500000(i−im) .So the formula for demand for bonds is:

Bd=$50000+$500000(i−im)

To fund the sum of demand for money and demand for bonds, add the formulas of the demand for money from part a, Md=$50000−$500000(i−im) and the demand for bonds, Bd=$50000+$500000(i−im) .

Md+Bd=$50000−$500000(i−im)+$50000+$500000(i−im)

=$50000+$50000

=$100000

So the sum of Person M’s demand for money and bonds is $100000 , the amount of wealth.

Economics Concept Introduction

Introduction:

Equilibrium in asset market occurs when demand of money is equal to supply of money.

c)

To determine

To find: The interest rate on bonds in asset market equilibrium

c)

Expert Solution

Answer to Problem 3NP

The i8nterest rate on bonds in asset market equilibrium is 6%.

Explanation of Solution

In order to find the interest rate on bonds in asset market equilibrium, either set money supply, $20000, equal to money demand from part a. or set bond supply, $80000, equal to bond demand from part b., set im=0 and solve for i.

Md=Ms

50000−500000(i−im)=20000

50000−500000(i−0)=20000

50000−500000i=20000

−500000i=−30000

Continue by dividing through by -500000

−500000i−500000=−30000−500000

i=0.6

So, the interest rate on bonds in asset market equilibrium is i=0.6=6% .

Economics Concept Introduction

Introduction:

Equilibrium in asset market occurs when demand of money is equal to supply of money.

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Answer 2

Question

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

Chapter 7, Problem 3NP

a)

To determine

To write: The algebric form of demand for money as a function of bond and checking account interest rates.

a)

Expert Solution

Answer to Problem 3NP

The equation for Person M’s money demand is Md=$50000−$500000(i−im) .

Explanation of Solution

Given information:

Value of bonds = $50000

2ⁿ^d bond = $5000

Net wealth = Total wealth − Amount invested.

For second bond, interest rate is more compared to checking account.

So to complete the formula, subtract $50000 and the formula $5000(i−im)100 from $100000 . This is done because $50000 is invested and $5000 is value of bond which gives interest .

So, Demand for money is,

Md=$100000−$50000−$5000(i−im).100

Md=$50000−$500000(i−im)

Value of bond = $5000

Interest rate on bond = i

Interest rate on checking account = i^m

In percentage form, value of bond is written as $5000(i−im)

Hence the equation for Person M’s money demand is Md=$50000−$500000(i−im) .

Economics Concept Introduction

Introduction:

Equilibrium in asset market occurs when demand of money is equal to supply of money.

b)

To determine

To write: The algebric formula of demand for bonds.

b)

Expert Solution

Answer to Problem 3NP

Algebric formula of demand for bonds is Bd=$50000+$500000(i−im)

Explanation of Solution

Person M’s demand for bonds is simply the sum of the amount of his money that is wanted for investment in bonds, $50000 and $500000(i−im) .So the formula for demand for bonds is:

Bd=$50000+$500000(i−im)

To fund the sum of demand for money and demand for bonds, add the formulas of the demand for money from part a, Md=$50000−$500000(i−im) and the demand for bonds, Bd=$50000+$500000(i−im) .

Md+Bd=$50000−$500000(i−im)+$50000+$500000(i−im)

=$50000+$50000

=$100000

So the sum of Person M’s demand for money and bonds is $100000 , the amount of wealth.

Economics Concept Introduction

Introduction:

Equilibrium in asset market occurs when demand of money is equal to supply of money.

c)

To determine

To find: The interest rate on bonds in asset market equilibrium

c)

Expert Solution

Answer to Problem 3NP

The i8nterest rate on bonds in asset market equilibrium is 6%.

Explanation of Solution

In order to find the interest rate on bonds in asset market equilibrium, either set money supply, $20000, equal to money demand from part a. or set bond supply, $80000, equal to bond demand from part b., set im=0 and solve for i.

Md=Ms

50000−500000(i−im)=20000

50000−500000(i−0)=20000

50000−500000i=20000

−500000i=−30000

Continue by dividing through by -500000

−500000i−500000=−30000−500000

i=0.6

So, the interest rate on bonds in asset market equilibrium is i=0.6=6% .

Economics Concept Introduction

Introduction:

Equilibrium in asset market occurs when demand of money is equal to supply of money.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

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

Chapter 7, Problem 3NP

a)

To determine

To write: The algebric form of demand for money as a function of bond and checking account interest rates.

a)

Expert Solution

Answer to Problem 3NP

The equation for Person M’s money demand is Md=$50000−$500000(i−im) .

Explanation of Solution

Given information:

Value of bonds = $50000

2ⁿ^d bond = $5000

Net wealth = Total wealth − Amount invested.

For second bond, interest rate is more compared to checking account.

So to complete the formula, subtract $50000 and the formula $5000(i−im)100 from $100000 . This is done because $50000 is invested and $5000 is value of bond which gives interest .

So, Demand for money is,

Md=$100000−$50000−$5000(i−im).100

Md=$50000−$500000(i−im)

Value of bond = $5000

Interest rate on bond = i

Interest rate on checking account = i^m

In percentage form, value of bond is written as $5000(i−im)

Hence the equation for Person M’s money demand is Md=$50000−$500000(i−im) .

Economics Concept Introduction

Introduction:

Equilibrium in asset market occurs when demand of money is equal to supply of money.

b)

To determine

To write: The algebric formula of demand for bonds.

b)

Expert Solution

Answer to Problem 3NP

Algebric formula of demand for bonds is Bd=$50000+$500000(i−im)

Explanation of Solution

Person M’s demand for bonds is simply the sum of the amount of his money that is wanted for investment in bonds, $50000 and $500000(i−im) .So the formula for demand for bonds is:

Bd=$50000+$500000(i−im)

To fund the sum of demand for money and demand for bonds, add the formulas of the demand for money from part a, Md=$50000−$500000(i−im) and the demand for bonds, Bd=$50000+$500000(i−im) .

Md+Bd=$50000−$500000(i−im)+$50000+$500000(i−im)

=$50000+$50000

=$100000

So the sum of Person M’s demand for money and bonds is $100000 , the amount of wealth.

Economics Concept Introduction

Introduction:

Equilibrium in asset market occurs when demand of money is equal to supply of money.

c)

To determine

To find: The interest rate on bonds in asset market equilibrium

c)

Expert Solution

Answer to Problem 3NP

The i8nterest rate on bonds in asset market equilibrium is 6%.

Explanation of Solution

In order to find the interest rate on bonds in asset market equilibrium, either set money supply, $20000, equal to money demand from part a. or set bond supply, $80000, equal to bond demand from part b., set im=0 and solve for i.

Md=Ms

50000−500000(i−im)=20000

50000−500000(i−0)=20000

50000−500000i=20000

−500000i=−30000

Continue by dividing through by -500000

−500000i−500000=−30000−500000

i=0.6

So, the interest rate on bonds in asset market equilibrium is i=0.6=6% .

Economics Concept Introduction

Introduction:

Equilibrium in asset market occurs when demand of money is equal to supply of money.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

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

Chapter 7, Problem 3NP

a)

To determine

To write: The algebric form of demand for money as a function of bond and checking account interest rates.

a)

Expert Solution

Answer to Problem 3NP

The equation for Person M’s money demand is Md=$50000−$500000(i−im) .

Explanation of Solution

Given information:

Value of bonds = $50000

2ⁿ^d bond = $5000

Net wealth = Total wealth − Amount invested.

For second bond, interest rate is more compared to checking account.

So to complete the formula, subtract $50000 and the formula $5000(i−im)100 from $100000 . This is done because $50000 is invested and $5000 is value of bond which gives interest .

So, Demand for money is,

Md=$100000−$50000−$5000(i−im).100

Md=$50000−$500000(i−im)

Value of bond = $5000

Interest rate on bond = i

Interest rate on checking account = i^m

In percentage form, value of bond is written as $5000(i−im)

Hence the equation for Person M’s money demand is Md=$50000−$500000(i−im) .

Economics Concept Introduction

Introduction:

Equilibrium in asset market occurs when demand of money is equal to supply of money.

b)

To determine

To write: The algebric formula of demand for bonds.

b)

Expert Solution

Answer to Problem 3NP

Algebric formula of demand for bonds is Bd=$50000+$500000(i−im)

Explanation of Solution

Person M’s demand for bonds is simply the sum of the amount of his money that is wanted for investment in bonds, $50000 and $500000(i−im) .So the formula for demand for bonds is:

Bd=$50000+$500000(i−im)

To fund the sum of demand for money and demand for bonds, add the formulas of the demand for money from part a, Md=$50000−$500000(i−im) and the demand for bonds, Bd=$50000+$500000(i−im) .

Md+Bd=$50000−$500000(i−im)+$50000+$500000(i−im)

=$50000+$50000

=$100000

So the sum of Person M’s demand for money and bonds is $100000 , the amount of wealth.

Economics Concept Introduction

Introduction:

Equilibrium in asset market occurs when demand of money is equal to supply of money.

c)

To determine

To find: The interest rate on bonds in asset market equilibrium

c)

Expert Solution

Answer to Problem 3NP

The i8nterest rate on bonds in asset market equilibrium is 6%.

Explanation of Solution

In order to find the interest rate on bonds in asset market equilibrium, either set money supply, $20000, equal to money demand from part a. or set bond supply, $80000, equal to bond demand from part b., set im=0 and solve for i.

Md=Ms

50000−500000(i−im)=20000

50000−500000(i−0)=20000

50000−500000i=20000

−500000i=−30000

Continue by dividing through by -500000

−500000i−500000=−30000−500000

i=0.6

So, the interest rate on bonds in asset market equilibrium is i=0.6=6% .

Economics Concept Introduction

Introduction:

Equilibrium in asset market occurs when demand of money is equal to supply of money.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 7, Problem 3NP

a)

To determine

To write: The algebric form of demand for money as a function of bond and checking account interest rates.

a)

Expert Solution

Answer to Problem 3NP

The equation for Person M’s money demand is Md=$50000−$500000(i−im) .

Explanation of Solution

Given information:

Value of bonds = $50000

2ⁿ^d bond = $5000

Net wealth = Total wealth − Amount invested.

For second bond, interest rate is more compared to checking account.

So to complete the formula, subtract $50000 and the formula $5000(i−im)100 from $100000 . This is done because $50000 is invested and $5000 is value of bond which gives interest .

So, Demand for money is,

Md=$100000−$50000−$5000(i−im).100

Md=$50000−$500000(i−im)

Value of bond = $5000

Interest rate on bond = i

Interest rate on checking account = i^m

In percentage form, value of bond is written as $5000(i−im)

Hence the equation for Person M’s money demand is Md=$50000−$500000(i−im) .

Economics Concept Introduction

Introduction:

Equilibrium in asset market occurs when demand of money is equal to supply of money.

b)

To determine

To write: The algebric formula of demand for bonds.

b)

Expert Solution

Answer to Problem 3NP

Algebric formula of demand for bonds is Bd=$50000+$500000(i−im)

Explanation of Solution

Person M’s demand for bonds is simply the sum of the amount of his money that is wanted for investment in bonds, $50000 and $500000(i−im) .So the formula for demand for bonds is:

Bd=$50000+$500000(i−im)

To fund the sum of demand for money and demand for bonds, add the formulas of the demand for money from part a, Md=$50000−$500000(i−im) and the demand for bonds, Bd=$50000+$500000(i−im) .

Md+Bd=$50000−$500000(i−im)+$50000+$500000(i−im)

=$50000+$50000

=$100000

So the sum of Person M’s demand for money and bonds is $100000 , the amount of wealth.

Economics Concept Introduction

Introduction:

Equilibrium in asset market occurs when demand of money is equal to supply of money.

c)

To determine

To find: The interest rate on bonds in asset market equilibrium

c)

Expert Solution

Answer to Problem 3NP

The i8nterest rate on bonds in asset market equilibrium is 6%.

Explanation of Solution

In order to find the interest rate on bonds in asset market equilibrium, either set money supply, $20000, equal to money demand from part a. or set bond supply, $80000, equal to bond demand from part b., set im=0 and solve for i.

Md=Ms

50000−500000(i−im)=20000

50000−500000(i−0)=20000

50000−500000i=20000

−500000i=−30000

Continue by dividing through by -500000

−500000i−500000=−30000−500000

i=0.6

So, the interest rate on bonds in asset market equilibrium is i=0.6=6% .

Economics Concept Introduction

Introduction:

Equilibrium in asset market occurs when demand of money is equal to supply of money.

Answer 6

Chapter 7, Problem 3NP

a)

To determine

To write: The algebric form of demand for money as a function of bond and checking account interest rates.

a)

Expert Solution

Answer to Problem 3NP

The equation for Person M’s money demand is Md=$50000−$500000(i−im) .

Explanation of Solution

Given information:

Value of bonds = $50000

2ⁿ^d bond = $5000

Net wealth = Total wealth − Amount invested.

For second bond, interest rate is more compared to checking account.

So to complete the formula, subtract $50000 and the formula $5000(i−im)100 from $100000 . This is done because $50000 is invested and $5000 is value of bond which gives interest .

So, Demand for money is,

Md=$100000−$50000−$5000(i−im).100

Md=$50000−$500000(i−im)

Value of bond = $5000

Interest rate on bond = i

Interest rate on checking account = i^m

In percentage form, value of bond is written as $5000(i−im)

Hence the equation for Person M’s money demand is Md=$50000−$500000(i−im) .

Economics Concept Introduction

Introduction:

Equilibrium in asset market occurs when demand of money is equal to supply of money.

Answer 7

Chapter 7, Problem 3NP

a)

To determine

To write: The algebric form of demand for money as a function of bond and checking account interest rates.

Answer 8

a)

Expert Solution

Answer to Problem 3NP

The equation for Person M’s money demand is Md=$50000−$500000(i−im) .

Answer 9

a)

Expert Solution

Answer 10

a)

Expert Solution

Answer 11

Expert Solution

Answer 12

Explanation of Solution

Given information:

Value of bonds = $50000

2ⁿ^d bond = $5000

Net wealth = Total wealth − Amount invested.

For second bond, interest rate is more compared to checking account.

So to complete the formula, subtract $50000 and the formula $5000(i−im)100 from $100000 . This is done because $50000 is invested and $5000 is value of bond which gives interest .

So, Demand for money is,

Md=$100000−$50000−$5000(i−im).100

Md=$50000−$500000(i−im)

Value of bond = $5000

Interest rate on bond = i

Interest rate on checking account = i^m

In percentage form, value of bond is written as $5000(i−im)

Hence the equation for Person M’s money demand is Md=$50000−$500000(i−im) .

Answer 13

Economics Concept Introduction

Introduction:

Equilibrium in asset market occurs when demand of money is equal to supply of money.

Answer 14

b)

To determine

To write: The algebric formula of demand for bonds.

b)

Expert Solution

Answer to Problem 3NP

Algebric formula of demand for bonds is Bd=$50000+$500000(i−im)

Explanation of Solution

Person M’s demand for bonds is simply the sum of the amount of his money that is wanted for investment in bonds, $50000 and $500000(i−im) .So the formula for demand for bonds is:

Bd=$50000+$500000(i−im)

To fund the sum of demand for money and demand for bonds, add the formulas of the demand for money from part a, Md=$50000−$500000(i−im) and the demand for bonds, Bd=$50000+$500000(i−im) .

Md+Bd=$50000−$500000(i−im)+$50000+$500000(i−im)

=$50000+$50000

=$100000

So the sum of Person M’s demand for money and bonds is $100000 , the amount of wealth.

Economics Concept Introduction

Introduction:

Equilibrium in asset market occurs when demand of money is equal to supply of money.

Answer 15

b)

To determine

To write: The algebric formula of demand for bonds.

Answer 16

b)

Expert Solution

Answer to Problem 3NP

Algebric formula of demand for bonds is Bd=$50000+$500000(i−im)

Answer 17

b)

Expert Solution

Answer 18

b)

Expert Solution

Answer 19

Expert Solution

Answer 20

Explanation of Solution

Person M’s demand for bonds is simply the sum of the amount of his money that is wanted for investment in bonds, $50000 and $500000(i−im) .So the formula for demand for bonds is:

Bd=$50000+$500000(i−im)

To fund the sum of demand for money and demand for bonds, add the formulas of the demand for money from part a, Md=$50000−$500000(i−im) and the demand for bonds, Bd=$50000+$500000(i−im) .

Md+Bd=$50000−$500000(i−im)+$50000+$500000(i−im)

=$50000+$50000

=$100000

So the sum of Person M’s demand for money and bonds is $100000 , the amount of wealth.

Answer 21

Economics Concept Introduction

Introduction:

Equilibrium in asset market occurs when demand of money is equal to supply of money.

Answer 22

c)

To determine

To find: The interest rate on bonds in asset market equilibrium

c)

Expert Solution

Answer to Problem 3NP

The i8nterest rate on bonds in asset market equilibrium is 6%.

Explanation of Solution

In order to find the interest rate on bonds in asset market equilibrium, either set money supply, $20000, equal to money demand from part a. or set bond supply, $80000, equal to bond demand from part b., set im=0 and solve for i.

Md=Ms

50000−500000(i−im)=20000

50000−500000(i−0)=20000

50000−500000i=20000

−500000i=−30000

Continue by dividing through by -500000

−500000i−500000=−30000−500000

i=0.6

So, the interest rate on bonds in asset market equilibrium is i=0.6=6% .

Economics Concept Introduction

Introduction:

Equilibrium in asset market occurs when demand of money is equal to supply of money.

Answer 23

c)

To determine

To find: The interest rate on bonds in asset market equilibrium

Answer 24

c)

Expert Solution

Answer to Problem 3NP

The i8nterest rate on bonds in asset market equilibrium is 6%.

Answer 25

c)

Expert Solution

Answer 26

c)

Expert Solution

Answer 27

Expert Solution

Answer 28

Explanation of Solution

In order to find the interest rate on bonds in asset market equilibrium, either set money supply, $20000, equal to money demand from part a. or set bond supply, $80000, equal to bond demand from part b., set im=0 and solve for i.

Md=Ms

50000−500000(i−im)=20000

50000−500000(i−0)=20000

50000−500000i=20000

−500000i=−30000

Continue by dividing through by -500000

−500000i−500000=−30000−500000

i=0.6

So, the interest rate on bonds in asset market equilibrium is i=0.6=6% .