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Macroeconomics 11th Edition by Michael Parkin
Edition 11ISBN: 9780133423884Macroeconomics 11th Edition by Michael Parkin
Edition 11ISBN: 9780133423884 Exercise 2
The Money Market
In Minland in Problem, the interest rate is 4 percent a year. Suppose that real GDP decreases to $10 billion and the quantity of money supplied remains unchanged. Do people buy bonds or sell bondsExplain how the interest rate changes.
Problem
The spreadsheet provides information about the demand for money in Minland. Column A is the nominal interest rate, r. Columns B and C show the quantity of money demanded at two values of real GDP: Y 0 is $10 billion and Y 1 is $20 billion. The quantity of money supplied is $3 billion. Initially, real GDP is $20 billion. What happens in Minland if the interest rate (i) exceeds 4 percent a year and (ii) is less than 4 percent a year?
In Minland in Problem, the interest rate is 4 percent a year. Suppose that real GDP decreases to $10 billion and the quantity of money supplied remains unchanged. Do people buy bonds or sell bondsExplain how the interest rate changes.
Problem
The spreadsheet provides information about the demand for money in Minland. Column A is the nominal interest rate, r. Columns B and C show the quantity of money demanded at two values of real GDP: Y 0 is $10 billion and Y 1 is $20 billion. The quantity of money supplied is $3 billion. Initially, real GDP is $20 billion. What happens in Minland if the interest rate (i) exceeds 4 percent a year and (ii) is less than 4 percent a year?
Explanation
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When the real GDP decreases from $20 bil...
Macroeconomics 11th Edition by Michael Parkin
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