The demand and supply of money may be estimated by the following equations:

                                                          M^d = 2,250 – 250i

                                                          M^s = 1,000

                    a)   Calculate the equilibrium i and illustrate it diagrammatically.

                    b)   Calculate the new i under the following circumstances and illustrate it diagrammatically:

                            i) M^s = 1,125

                           ii) M^d = 2,000 – 250i

Answer rating: 100% (QA)

a Equilibrium Interest Rate Calculation At equilibrium the quantity of money demanded Md equals ... View the full answer