Question: please answer 4. Suppose the money demand function is Md P = 1000 + 0.2Y 1000 (r + pe). I. Calculate velocity if Y =
please answer

4. Suppose the money demand function is Md P = 1000 + 0.2Y 1000 (r + pe). I. Calculate velocity if Y = 2000, r = .06, and pe = .04. II. If the money supply (Ms) is 2600, what is the price level? III. Now suppose the real interest rate rises to 0.11, but Y and Ms are unchanged. What happens to velocity and the price level? So if the nominal interest rate were to rise from 0.10 to 0.15 over the course of a year, with Y remaining at 2000, what would the ination rate be? 5. What happens to M1 and M2 due to each of the following changes? I. You take $500 out of your checking account and put it into a passbook savings account. II. You take $1000 out of your checking account and buy traveler's checks. 111. You take $1500 out of your money-market mutual md and deposit into your checking account. IV. You cash in $2000 in savings bonds and invest the money in a certicate of deposit. 6. What mction is money playing in each of these situations? V. You walk into a store in Germany and see that all the prices are in euros. b. You buy a candy bar for $1.25. VI. Your aunt Jane keeps $100 bills tucked into many books in her house
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
