Suppose That in Mysore,the Reserve-Deposit Ratio Is Res = 0

question 11

Multiple Choice

Suppose that in Mysore,the reserve-deposit ratio is res = 0.5 - 2i,where i is the nominal interest rate.The current-deposit ratio is 0.2 and the monetary base equals 100.The real quantity of money demanded is given by the money demand function L(Y,i) = 0.5Y - 10i,where Y is real output.Currently,the real interest rate is 5% and the economy expects an inflation rate of 5%.The money supply equals

• A)200.
• B)240.
• C)300.
• D)400.

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Definitions:

Pre-Tax Cost of Debt

The rate of return that a company pays on its debt before taking into account taxes.

Weighted Average Cost of Capital (WACC)

The average rate of return a company is expected to pay its security holders to finance its assets, weighted by the proportion of equity and debt in the company's capital structure.

Coupon Rate

The rate of interest a bond pays annually, expressed as a percentage of its nominal value.

Dividend Growth Rate

The annualized percentage rate of growth of a company’s dividend payout, indicating the stability and growth prospects of the company to investors.