1. What is the equilibrium interest rate in Moola? % 2. What is the level of inv
ID: 1092843 • Letter: 1
Question
1. What is the equilibrium interest rate in Moola? %
2. What is the level of investment at the equilibrium interest rate? $
3. There is a recessionary output gapinflationary output gap of $______ billion.
Given money demand, by how much would the Moola central bank need to change the money supply in order to close the output gap?
4. IncreaseDecrease the money supply by $________ billion
5. What is the (expenditure) multiplier in Moola?
MoneySupply Money
Demand Interest
Rate Investment at Interest
Rate Shown Potential Real GDP Actual Real GDP at Interest
Rate Shown $500 $800 3% $80 $350 $390 500 700 4 70 350 370 500 600 5 60 350 350 500 500 6 50 350 330 500 400 7 40 350 310
Explanation / Answer
1. What is the equilibrium interest rate in Moola? %
At equilibrium, Money supply= money demand
equilibrium interest rate = 6%
2. What is the level of investment at the equilibrium interest rate? $
level of investment at the equilibrium interest rate= $50 billion
3. There is a recessionary output gapinflationary output gap of $______ billion.
recessionary output gap= 350-330 = $20 billion
Given money demand, by how much would the Moola central bank need to change the money supply in order to close the output gap?
4. Increase the money supply by $20 billion
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