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

question 83

Multiple Choice

Suppose that in Mysore,the reserve-deposit ratio is res = 0.5 - 2 i,
Where i is the nominal interest rate.The currency-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 multiplier equals

• A)2)00.
• B)2)40.
• C)3)00.
• D)4)00.

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Definitions:

Duration

A measure of the sensitivity of the price of a bond or other debt instrument to changes in interest rates, representing the weighted average time to receive the bond's cash flows.

Coupon

A voucher entitling the holder to a discount for a particular product or service.

Zero-Coupon Bond

A bond that is issued at a discount and repaid at face value at maturity, without periodic interest payments.

Duration

A measure of the sensitivity of the price of a bond or other debt instrument to a change in interest rates, typically expressed in years.