Refer to the table for Moola given below to answer the following questions. Money Supply Money...
Refer to the table for Moola given below to answer the following questions.
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Instructions: Enter your answers as whole numbers.
a. What is the equilibrium interest rate in Moola?
b. What is the level of investment at the equilibrium interest rate?
c. Is there either a recessionary output gap (negative GDP gap) or an inflationary output gap (positive GDP gap) at the equilibrium interest rate and, if either, what is the amount?
d. Given money demand, by how much would the Moola central bank need to change the money supply to close the output gap?
e. What is the expenditure multiplier in Moola?
Homework Answers
A - The equlibrium interest rate is 5 % . This is because the money supply and demand are equal at this point.
B - Investment at this level is $ 50.
C - There is recessionary output gap. This is because at equlibrium interest rate , actual GDP is less than potential GDP by $ 20. Hence there is recessionary gap.
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