Question

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

Answer 1

Answer:

The answer is "4".

Explanation:

please find the missing value:

Suppose the demand is made for real money  given by:

$\frac{m^d}{p}=\frac{Y}{6}-150i$

In equilibrium:

$\to \frac{M^d}{P} = \frac{M^S}{P}\\\\\to (\frac{13,800}{6}) - 150i = 1,700\\\\\to 2,300 - 150i = 1,700\\\\\to 150i = 600\\\\\to i= \frac{600}{150}\\\\\to i = 4$