Question

Assume that the following data characterize the hypothetical economy of trance: money supply = $200 billion; quantity of money demanded for transactions = $150 billion; quantity of money demanded as an asset = $10 billion at 12 percent interest, increasing by $10 billion for each 2-percentage-point fall in the interest rate.

a. what is the equilibrium interest rate in trance?
b. at the equilibrium interest rate, what are the quantity of money supplied, the total quantity of money demanded, the amount of money demanded for transactions, and the amount of money demanded as an asset in trance?

Answer 1

After thorough researching, the equilibrium interest rate is $200.00. The equilibrium interest rate has a connection with the demand and supply of the financial state or the money. The equilibrium is only reached if there is an equality ensured and stated.