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# The demand for money in a country is given

Question # 00578132
Subject: Economics
Due on: 08/24/2017
Posted On: 08/24/2017 08:54 AM

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# Calculating the equilibrium interest rate

The demand for money in a country is given by: Md = 200,000 - 200,000r +Y
Where Md is money demand in dollars, r is the interest rate (a 10% interest rate = r = .1), and Y is national income. Assume Y is initially 1,000,000.

a. Suppose the money supply is set by the central bank at \$1,198,000. What is the .com/economics/equilibrium">equilibrium interest rate?
b. Suppose income decreases from 1,000,000 to 999,000 determine the new equilibrium interest rate.
c. If the central bank wants to keep the interest rate the same as in part a, by how much should it increase or decrease the money supply?

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#### The demand for money in a country is given

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Posted On: 08/24/2017 08:54 AM
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