Question: The money demand function is: (M/P) d = 2,000 200r , where r is the interest rate in percentage; the money supply (M) = 2000

The money demand function is: (M/P) d = 2,000 200r , where r is the interest rate in percentage; the money supply (M) = 2000 and the price level (P) = 4. With this information solve the following:

a) Calculate the equilibrium interest rate.

b) If the price level remains fixed and the money supply increases from 2,000 to 2,400, the equilibrium interest rate will be:

c) If the price level remains fixed and the money supply decreases from 2,000 to 1,400, the equilibrium interest rate will be:

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