a) Clearly explain the reasons for holding money in Keynesian system. b) Identify the weaknesses of...

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a) Clearly explain the reasons for holding money in Keynesian system. b) Identify the weaknesses of Fisher's quantity theory of money. c) You are given the following information about a hypothetical economy: i. 11. c = 100+ 0.8y I = 75-100r 111. G = 350 M³ = 950 m² = 0.2y Where y income, r=rate of interest. Required: = 750 260r (Consumption function) (Investment) (Government spending) (Real money supply) (Transaction demand for money) (Speculative demand for money) (6 marks) (5 marks) Specify both the IS and LM equations (4 marks) Compute the equilibrium values of y and r that simultaneously clear both the goods and money markets. (2 marks) Compute the equilibrium values of C, I and map. (3 marks) a) Clearly explain the reasons for holding money in Keynesian system. b) Identify the weaknesses of Fisher's quantity theory of money. c) You are given the following information about a hypothetical economy: i. 11. c = 100+ 0.8y I = 75-100r 111. G = 350 M³ = 950 m² = 0.2y Where y income, r=rate of interest. Required: = 750 260r (Consumption function) (Investment) (Government spending) (Real money supply) (Transaction demand for money) (Speculative demand for money) (6 marks) (5 marks) Specify both the IS and LM equations (4 marks) Compute the equilibrium values of y and r that simultaneously clear both the goods and money markets. (2 marks) Compute the equilibrium values of C, I and map. (3 marks)

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SOLUTION a According to Keynesian economics money is held for three main reasons transactions precautionary and speculative motives The transactions m... View the full answer