d 84. Refer to Figure 30-2. At the end of 2009 the relevant money-demand curve was the one labeled MD2. At the end of 2010 the relevant money-demand curve was the one labeled MD₁. Assuming the economy is always in equilibrium, what was the economy's approximate inflation rate for 2010? a. -43 percent b. -57 percent C. d. 57 percent 75 percent

d 84. Refer to Figure 30-2. At the end of 2009 the relevant money-demand curve was the one labeled MD2. At the end of 2010 the relevant money-demand curve was the one labeled MD₁. Assuming the economy is always in equilibrium, what was the economy's approximate inflation rate for 2010? a. -43 percent b. -57 percent C. d. 57 percent 75 percent

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Explain the IS LM model for reduced policy rate in goods and services market and finincal market
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In a particular economy the real money demand function is Real Interest Rate, r (%) 0.451 M 0.40- 3,000 + 0.10Y-9,000i. P 0.35- Assume that M = 7,000 and P = 2. Initially, expected inflation, zewas 0.02. Initially, when Y= 8000, the real interest rate of 0.013 cleared the asset market and when Y = 9000, the real interest rate of 0.024 cleared the asset market. The initial LM curve is drawn as 0.30- 0.25 0.20- LM,. 0.15- Now suppose that the expected inflation rate increases to 0.03. Using the new expected inflation rate, calculate the real interest rate that clears the asset market when Y = 8000. (Enter your answer in decimals, rounded to three decimals.) D. This is point C. 0.10- LM, 0.05- 0.00+ 7 8 10 Output, Y (thousands)