The figure above shows the demand for money in Kiteland.
a) If the Kiteland Central Bank has set the quantity of money so that the equilibrium interest rate is 4 percent, d supply of money curve.
b) Suppose Kiteland's real GDP increases so that the demand for money changes by 100 billion yaks. The Kitela Central Bank takes no actions. Show the effects of this event on your figure. What happens to the interest rate? W happens to the quantity of money in the economy?
c) If the Central Bank wants to prevent the interest rate from changing, what must it do to the quantity of mone Draw the new supply of money curve.
d) In order to change the quantity of money to keep the interest rate constant, suppose the Kiteland Central Ban open market operations. Does it make an open market purchase or an open market sale? Explain your answer.

Question

Quizplus · Accepted Answer

The Answer of The figure above shows the demand for money in Kiteland.
a) If the Kiteland Central Bank has set the quantity of money so that the equilibrium interest rate is 4 percent, d supply of money curve.
b) Suppose Kiteland's real GDP increases so that the demand for money changes by 100 billion yaks. The Kitela Central Bank takes no actions. Show the effects of this event on your figure. What happens to the interest rate? W happens to the quantity of money in the economy?
c) If the Central Bank wants to prevent the interest rate from changing, what must it do to the quantity of mone Draw the new supply of money curve.
d) In order to change the quantity of money to keep the interest rate constant, suppose the Kiteland Central Ban open market operations. Does it make an open market purchase or an open market sale? Explain your answer.

The Figure Above Shows the Demand for Money in Kiteland