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Let R1 be the current equilbrium rate, but the President mandates that interest rates are...

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Finance

Let R1 be the current equilbrium rate, but the President mandates that interest rates are now R3.

At the time of the mandate there is a(n) ...

a. excess demand for money

b. excess supply for money (MY ANSWER)

c. chance for inflation

d. increase in GNP

PLEASE SOLVE FOR THE QUESTION BELOW:

1) meaning that interest rate will ...

a. stay at R3

b. move to R2

c. move to R1

d. be less volatile

since people will ...

a. buy bonds, push bond prices up

b. sell bonds, push bond prices up

c. buy bonds, push bond prices down

d. sell bonds, push bond prices down

2) Starting at the equilbrium rate R1, what could move the equilibrium rate to R2?

a. A decrease in the money supply

b. An increase in inflation

c. A large government infrastructure package

d. All of the above

image

Interest rate, R Real money supply 2 R2 Aggregate real money demand, L(R,Y) R' R3 3 Q2 10% (= Q1) Q3 Real money holdings

Answer & Explanation Solved by verified expert
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