PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
7th Edition
ISBN: 9781260110920
Author: Frank
Publisher: MCG
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Question
Chapter 14, Problem 2P
(a)
To determine
Estimate the average money held with the nominal interest rate.
(b)
To determine
Illustrate the money demand curve for the interest rate between 1% and 12%.
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Students have asked these similar questions
Suppose that the interest rate is 4 percent. What is the future value of $100 four years from now? How much of the future value is total interest? By how much would total interest be greater at a 6 percent interest rate than at a 4 percent interest rate?
The accompanying table shows Francesca's estimated annual benefits of holding different amounts of money.
Average money holdings
$ 700
Total benefit
$ 50
800
59
900
66
1,000
71
1,100
74
How much money will Francesca hold if the nominal interest rate is 6 percent? (Assume she wants her money holdings to be in multiples of $100.)
Multiple Choice
$1,000
$900
$800
$700
When the interest rate falls, how does the opportunity cost of holding money and the quantity of money demanded
change?
Draw a demand for money curve and label it MD.
Nominal interest rate (percent per year)
8-
on Heip
Draw a point at an interest rate of 5 percent a year.
Draw an arrow on the MD curve to show the effect of a rise in the interest rate above 5 percent a year. Label it 1.
7-
Draw an arrow on the MD curve to show the effect of a fall in the interest rate below 5 percent a year. Label it 2.
6-
When the interest rate falls, other things remaining the same, the opportunity cost of holding money
5-
and the
4-
O A. falls; quantity of money demanded increases
3-
O B. falls; demand for money increases
2-
C. rises; demand for money decreases
D. rises; quantity of money demanded decreases
1-
2.6
2.7
2.8
2.9
3.0
3.1
3.2
3.3
3.4
Quantity of money (trillions of dollars)
>>> Draw only the objects specified in the question.
Click the graph, choose a tool in the palette and follow the…
Chapter 14 Solutions
PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
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