Suppose That the Transactions Demand for Money Is Equal to

question 392

Multiple Choice

$$\begin{array} { | c | c | } \hline \text { Interest Rate } & \text { Asset Demand for Money (Billions) } \\\hline 7 \% & \$ 200 \\\hline 6 & 300 \\\hline 5 & 400 \\\hline 4 & 500 \\\hline\end{array}$$ Suppose that the transactions demand for money is equal to 20 percent of the nominal GDP, the supply of money is $800 billion, and the asset demand for money is that shown in the table. If the nominal GDP is $2,000 billion, the equilibrium interest rate is

• A) 4 percent.
• B) 5 percent.
• C) 6 percent.
• D) 7 percent.

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