Author Question: Suppose that the current money market equilibrium has an interest rate of 5 percent and a quantity ... (Read 165 times)

TFauchery · **on:** Jun 30, 2018

Suppose that the current money market equilibrium has an interest rate of 5 percent and a quantity of 2 trillion. Suppose that at a 6 percent interest rate, the quantity of money demanded is 1.5 trillion, while at a 4 percent interest rate it is 2.5 trillion. If the Fed makes an open-market purchase of 50 billion, and the money multiplier is 10, what will be the new money market equilibrium?
a. An interest rate of 6 percent and a quantity of 1.5 trillion.
b. An interest rate of 5 percent and a quantity of 2 trillion.
c. An interest rate of 4 percent and a quantity of 2.5 trillion.
d. None of the above.

Question 2

Consider an economy made up of 100 people, 60 of whom hold jobs, 10 of whom are looking for work, and 15 of whom are retired. The number of people in the civilian labor force is:
a. 30.
b. 60.
c. 85.
d. 90.
e. 70.