Refer to the given figure. Based on the diagram, the nominal interest rate equals ________ and the money supply equals ________.
A)7 percent; 300
B)1 percent; 500
C)5 percent; 500
D)3 percent; 700

Question

Refer to the given figure.  Based on the diagram, the nominal interest rate equals ________ and the money supply equals ________.
A)7 percent; 300 
B)1 percent; 500 
C)5 percent; 500 
D)3 percent; 700

Quizplus · Accepted Answer

The nominal interest rate is determined by the intersection of the money supply and money demand curves. In this case, the intersection occurs at 5 percent nominal rate of interest and money supply of 500.

Refer to the Given Figure