Question: Assume that the money demand function is ( M / P ) d = 2,200 - 200 r , where r is the interest rate

Assume that the money demand function is (M/P)^d= 2,200 - 200r, whereris the interest rate in percent. The money supplyMis 2,000, and the price levelPis 2.

a)Calculate the equilibrium interest rate.

b)Calculate the equilibrium interest rate if theFed expands the money supply so thatM=$2,800,

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