Assume That the Money Demand Function Is (M/P)^d = 2,200

question 84

Multiple Choice

Assume that the money demand function is (M/P) ^d = 2,200 - 200r, where r is the interest rate in percent. The money supply M is 2,000 and the price level P is 2. The equilibrium interest rate is ______ percent.

• A) 2
• B) 4
• C) 6
• D) 8

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Definitions:

Positive Statements

Claims that attempt to describe the world as it is.

Normative Statements

Claims that attempt to prescribe how the world should be.

Normative Statements

Claims that express judgments about what ought to be, incorporating opinions and values rather than factual assertions.

Positive Statements

Factual statements about the world that can be tested and validated; they describe "what is" rather than "what ought to be."