Q. The total demand as well as for money is equal to the transactions demand as well as plus the asset demand as well as for money.
(a) Assume that each dollar held for transactions purposes is spent on the average five times per year to buy final goods as well as services. If the nominal GDP is $10,000 billion ($10 trillion), what is the transaction demand as well as?
(b) The table below shows the asset demand as well as at certain rates of interest. Using your answer to part (a), complete the table to show the total demand as well as for money at various rates of interest. Interest rate asset demand as well as total demand as well as (in %) (Billions) 10 $ 30 $ 8 60 $ 6 90 $ 4 120 $
(c) if the money supply is $2060 billion, what will be the equilibrium rate of interest?
(d) if the money supply rises, will the equilibrium rate of interest rise or fall?
(e) if GDP rises, will the equilibrium rate of interest rise or fall?