If the IS curve is given by Y = 1,700

Question

If the IS curve is given by Y = 1,700 - 100r, the money demand function is given by (M/P)d = Y - 100r, the money supply is 1,000, and the price level is 2, then if the money supply is raised to 1,200, equilibrium income rises by:
A)200 and the interest rate falls by 2 percent.
B)100 and the interest rate falls by 1 percent.
C)50 and the interest rate falls by 0.5 percent.
D)200 and the interest rate remains unchanged.

Quizplus · Accepted Answer

The Answer of If the IS curve is given by Y = 1,700 - 100r, the money demand function is given by (M/P)d = Y - 100r, the money supply is 1,000, and the price level is 2, then if the money supply is raised to 1,200, equilibrium income rises by:
A)200 and the interest rate falls by 2 percent.
B)100 and the interest rate falls by 1 percent.
C)50 and the interest rate falls by 0.5 percent.
D)200 and the interest rate remains unchanged.