Question: please do asap thanks :) Consider the model we discussed in class without chockable deposits characterized by money supply (M') and money demand (Md) represented
Consider the model we discussed in class without chockable deposits characterized by money supply (M') and money demand (Md) represented in the following forms: M=M,Md=$YL(i) Suppose the linear functional form of the liquidity demand equation: L(i)=2.43i Question 1.A Write down the equilibrium condition in this financial market. Solve for the equilibrium interest rate mathematically and depict it graphically, taking the zero lower bound into account. Question 1.B Often, since central banks are unsure of the exact money supply in the economy, instead of choosing one specific money supply, they target a range (an upper and lower bound). Suppose the central bank is targeting an interest rate between iA=0.1 and iB=0.2 (also known as 10% and 20% ). What range of money supply would guarantee these interest rates? Denote these as MA and MD. Let $Y=1. Depict this graphically
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