It is assumed that households and businesses want to hold for transactions purposes an amount of money equal to one-half of the GDP. The table shows the amounts of money that households and businesses want to hold as an asset at various interest rates. Refer to the information above. If the GDP is $200 and the interest rate is 6, what total amount of money will households and businesses want to hold?

Question

It is assumed that households and businesses want to hold for transactions purposes an amount of money equal to one-half of the GDP. The table shows the amounts of money that households and businesses want to hold as an asset at various interest rates.  Refer to the information above. If the GDP is $200 and the interest rate is 6, what total amount of money will households and businesses want to hold?

Quizplus · Accepted Answer

If GDP is $200, households and businesses would want to hold $100 (one-half of GDP) for transaction purposes. Looking at the table, at an interest rate of 6, households and businesses want to hold a total of $260. Therefore, the total amount of money that households and businesses want to hold is $100 + $260 = $360. The closest answer choice is C, $160.

It Is Assumed That Households and Businesses Want to Hold