Suppose the money supply is $250 million dollars and the demand for money is given by Qm
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Question:
Suppose the money supply is $250 million dollars and the demand for money is given by Qm D = 400 - 40i, where Qm D is in millions of dollars.
A. What is the equilibrium interest rate in this economy?
B. If the Fed announced a target for the overnight rate of 5%, should they buy or sell bonds to achieve this goal?
C. Assuming that the desired reserve ratio is 25%, banks do not hold excess reserves, and there is no currency drain, what amount of bonds should they buy/sell in order to achieve their goal?
Related Book For
Managerial economics
ISBN: 978-1118041581
7th edition
Authors: william f. samuelson stephen g. marks
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