d. Now suppose that the supply of money is $1trn. Assume equilibrium in financial markets. Calculate the equilibrium interest rate. In equilibrium, money demand = money supply. $1.5 (0.8-2i) = $1 please show calculation step by step
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- Suppose the current economy requires $7 million for transactions. The table below shows the interest rate and asset demand. Interest Rate (%) 12% 10% 8% 6% 4% 2% Multiple Choice What is the total transaction demand when the interest rate is 4 percent? о о о $7 million $6 million $8 million Asset Demand (in millions of Dollars) $3 $6 $9 $22 million $12 $15 $18The money demand market is currently in equilibrium with MS = MD and the equilibrium interest rate. Now suppose that there is an increase in the price level. this will lead to _____ in the equilibrium quantity of money and _____ in the equilibrium interest rate. Select one: a. a decrease; a rise b. no change; a rise c. no change; a fall d. an increase; a fall Please explainQ.1.5 Which one of the following statements is NOT true? (a) Money is the most liquid asset.(b) Money is a store of value.(c) Money is a unit of account.(d) Money is another term for income.Q.1.6 Which of the following will cause the demand curve for money to shift to theright?(a) An increase in real Gross Domestic Product (GDP).(b) A decrease in the repo rate.(c) An increase in the quantity of money available.(d) A decrease in the quantity of money available.Q.1.7 A budget deficit occurs when: (a) there is an increase in taxation.(b) government spends less than is generated by taxation.(c) government spending is very high.(d) Government spends more than is generated by taxation.
- The graph shows a demand for money curve. Draw a new demand for money curve that shows the effect of an increase in real GDP. Label it MD₁. Draw a demand for money curve that shows the effect of an increase in the number of families that have a credit card. Draw this demand for money curve in relation to the original demand for money curve, MD. Label the new curve MD2. 12- 10- 8- Nominal interest rate (percent per year) 6- 4- 2- 0 2 4 6 8 MD 10 12 ☑ Quantity of money (trillions of dollars) >>> Draw only the objects specified in the question.Q.1.6 Which of the following will cause the demand curve for money to shift to theright?(a) An increase in real Gross Domestic Product (GDP).(b) A decrease in the repo rate.(c) An increase in the quantity of money available.(d) A decrease in the quantity of money available.Q.1.7 A budget deficit occurs when: (a) there is an increase in taxation.(b) government spends less than is generated by taxation.(c) government spending is very high.(d) Government spends more than is generated by taxation.moodle.unizwa.edu.om/mod/quiz/attempt.p If there is a surplus of a commodity, then, the price will rise 9 J5- شير مجلب عليه بول إخكر واحدان الدرجة من 0.50 علم هذا السؤال ths O Financial intermediaries are financial institutions through which savers can directly provide funds to borrowers 10 J- J alo daa o إختر واحدا 0.50 ga da l علم هذا السؤال thi O .Gold is an example of Fiat money 11 J عبر مجاب عليه بوز إختر واحدان الدرجة من 0.50 علم هذا السؤال TOSHIBA B/O 2111 & 6 7 7 V 50 8 A 99 FJ GY VI BY
- Assume money supply increases at rate z. Explain what seigniorage is. Use formulas. What are the factors that can increase the seigniorage?1. Suppose that the economy has the following money supply and demand equations: Money Supply: M = 8000Money Demand: M= 10,000 – 40,000rwhere money is in billions of dollars and interest rates, r , is written as a decimal(e.g., an interest rate of 10% would be written as .1 in the equation).A. Determine the equilibrium interest rate and quantity of money.B. What will happen in the money market if the interest rate is currently 10%?What is the amount of excess supply of or excess demand for money?C. Show in graph that at this interest rate (10%) there is disequilibrium in themoney market.E7% B A C 5% - M 100 150 200 300 Money ($ million) 25) Refer to Figure 11.1. Suppose the Quantity of money demanded is currently at Point A. increase money Demand could be caused by: A) a decrease in the interest rate. C) an increase in income. B) a decrease in income. D) an increase in the interest rate. Interest rate (%)
- dy Tools Tips Tips The following diagram represents the money market in the United States, which is currently in equilibrium, as indicated by the grey star. INTEREST RATE (Percent no 2 5.0 45 30 H 08 Money Demand Money Supply 07 00 D 10 11 12 13 QUANTITY OF MONEY (Triations of dollars) 14 New Curve ++ New Equilibrium Suppose the Federal Reserve (the Fed) announces that it is raising its target interest rate by 25 basis points, or 0.25%. It would achieve this by Use the green line (triangle symbols) on the preceding graph to illustrate the effects of this policy. Place the black point (plus symbol) on the graph to indicate the new equilibrium interest rate and quantity of money, the The sequence of events that results in a new equilibrium interest rate, after the Fed makes the change you selected, may be described as follows: which means that bond issuers Because there is money in the financial system, the quantity of money demanded sell bonds. This process continues until the new…The price of a bond O increases as interest rates in the financial sector increase O decreases as the price of precious commodities increase increases as interest rates in the financial sector decrease decrescos ar stock market values incroscoExercise 2 Suppose that money demand is given by MD= $Y(0.25 – i) where $Y is $100. Also, suppose that the supply of money is $20. a. What is the equilibrium interest rate? b. If the Federal Reserve Bank in the USA wants to increase i by 10 percentage points, at what level should it set the supply of money?
