The Demand for Money Is Given by Md = $Y

question 62

Essay

The demand for money is given by Md = $Y (0.3 - i),where $Y = 120 and the supply of money is $30.
a.What is the equilibrium interest rate?
b.If the central bank wants to decrease i by 2%,at what level should it set the supply of money?

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Definitions:

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Compensation, often financial, awarded by a court to a person who has suffered loss or injury due to the unlawful act or negligence of another.

Novation

In a contract, the substitution of a third party for one of the original parties; the duties remain the same under the contract, but one original party is discharged and the third party takes that original party’s place.

Substituted Contract

An agreement between the contracting parties to replace an existing contract with a new one, possibly altering terms or obligations.

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Financial compensation awarded in a lawsuit intended to punish the defendant for especially harmful behavior and deter future misconduct.