Shrinking money supply resulting change in interest rates
Problem: Explain the mechanism that causes a shrinking money supply to result in a change in interest rates.
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If the demand for money depends positively on real income and depends inversely on the nominal interest rate, what would happen to the price level today if the central bank announces (and people believe) that it will decrease the money growth rate
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If it will cost us approximately $0.75/bottle to supply more Coke to our customers, what should we do if our goal is to maximize profit?
In particular, please discuss the likely shifts in the supply and demand curves for these two products as well as the potential impact on equilibrium quantities and prices.
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