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ID: 1110456 • Letter: M
Question
Matt Robinson -- × Isat DW Page Larot Formus at Revic ViewTel we what you mant to do Linked Call ormatthng ab e pboard Edring 26 27 2. The Money Market (10) 28 Assume that "r" is the nominal interest rate in decimal form Suppose that Money Demand (MD) is given by the MD1 equation during the regular year & the MD2 equation during the holiday season MD1500 10000*r 30 MD2700 10000 r A. Fill in the MD & MS columns below. (3) B. If the Fed keeps the Money Supply (MS) at 200, by what % will the equilibrium interest rate change in the holiday season? 31 MD1 MD2 MS 34 35 36 37 38 39 0.01 0.015 0.02 0.025 0.03 0.035 0.04 0.045 0.05 0.055 0.06 43 45 46 47 48 C. Create a scatter chart of the data in Parts A & B, and place in the box to the right. (3) Problems Mini-tutcriel E O lype here to search 7:21Explanation / Answer
A) r MD1 MD2 MD=MD1+MD2 MS 0.01 400 600 1000 200 0.015 350 550 900 200 0.02 300 500 800 200 0.025 250 450 700 200 0.03 200 400 600 200 0.035 150 350 500 200 0.04 100 300 400 200 0.045 50 250 300 200 0.05 0 200 200 200 0.055 -50 150 100 200 0.06 -100 100 0 200 B) Equilibrium where MS = MD that is MS = MD =200 and r = 0.05 or 5%