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The demand for money in a country is given

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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?

Tags given country money demand money rate equilibrium 0 bank suppose central supply demand income rateb 1 determine increase decrease wants ratec 2 decreases initially 3 given country 200000r ywhere aume national dollars calculating

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