Question

Assume that the following data characterize the hypothetical economy of Trance: money supply = $210 billion;...

Assume that the following data characterize the hypothetical economy of Trance: money supply = $210 billion; quantity of money demanded for transactions = $160 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.

Instructions: Enter your answers as whole numbers.

a. What is the equilibrium interest rate in Trance?  percent.

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?

     

     Quantity of money supplied =

     

     Quantity of money demanded =

     

     Amount of money demanded for transactions =

     

     Amount of money demanded as an asset =

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