Question: Question 5 [6 points] Assume that the following data characterize a hypothetical economy: money supply = $200 billion; quantity of money demanded for transactions =
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Question 5 [6 points] Assume that the following data characterize a hypothetical economy: money supply = $200 billion; quantity of money demanded for transactions = $160 billion; quantity of money demanded as an asset = $25 billion at 10 percent interest' increasing by $5 billion for each 2-percentage point fall in the interest rate. a) What is the equilibrium interest rate? Equilibrium interest rate = 5,6?7% b) At the equilibrium interest rate, what is the quantity of money supplied? Money supplied = $77 billion c) At the equilibrium interest rate, what is the total quantity of money demanded? Money demanded = $98 billion d) At the equilibrium interest rate, what is the quantity of money demanded for transactions? Money demanded for transactions = $99 billion 8) At the equilibrium interest rate, what is the quantity of money demanded as an asset? Money demanded as an asset = $76 billion
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