Question

Find the new equilibrium interest rate if the money supply is $1,700 billion and output increases to $13,800 billion.

Answer 1

The answer is "4".

Step-by-step explanation:

please find the missing value:

Suppose the demand is made for real money given by:

`(m^d)/(p)=(Y)/(6)-150i`

In equilibrium:

`\to (M^d)/(P) = (M^S)/(P)\\\\\to ((13,800)/(6)) - 150i = 1,700\\\\\to 2,300 - 150i = 1,700\\\\\to 150i = 600\\\\\to i= (600)/(150)\\\\\to i = 4`