Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Microeconomics Expert

When the real interest rate increases, banks have an incentive to lend a greater portion of their deposits, which reduces the reserve-deposit ratio. In particular,suppose that res =0.4 - 2r,where res is the reserve-deposit ratio and r is the real interest rate. The currency-deposit ratio is 0.4, the price level is fixed at 1.0, and the monetary base is 60. The real quantity of money demanded is L(Y, i) = 0.5Y -10i, where Y is real output and i is the nominal interest rate. Assume that expected inflation is zero so that the nominal interest rate and the real interest rate are equal.

a. If r =i =0.10, what are the reserve-deposit ratio,the money multiplier, and the money supply? For what real output Y does a real interest rate of 0.10 clear the asset market?

b. Repeat part (a) for r =i = 0.05.

c. Suppose that the reserve-deposit ratio is fixed at the at the value you found in part (a) and is not affected by interest rates. If r = i = 0.05, for what output Y does the asset market clear in this case?

d. Is the LM curve flatter or steeper when the reserve-deposit ratio depends on the real interest rate than when the reserve-deposit ratio is fixed? describe your answer in economic terms.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M938639

Have any Question? 


Related Questions in Microeconomics

These questions are about the usa industrialization and

These questions are about the USA Industrialization and Economic Development. At least 200 words for each question! 1. What is meant by the term "development" inneo-classic economics? How might your answer to this questi ...

Assignment perfectly competitive and monopoly firmsin this

Assignment: Perfectly Competitive and Monopoly Firms In this Assignment, you will calculate total cost, total revenue, and total profit/loss. Based on the computed results, you will determine the optimal quantity of outp ...

Businesses should examine various internal methods of

Businesses should examine various internal methods of financing or nonbank sources of credit as opposed to obtaining a bank loan. Read "Entrepreneurship In Action - Where Do we Turn Now?" on page 504. Answer these questi ...

Case project 2-1 designing a corporate networkyou are asked

Case Project 2-1: Designing a Corporate Network You are asked to design a network for a medium-size company. The company decides to use the 10.0.0.0 private IP address. The network will span six buildings, with a router ...

How would a low-cost price leader enforce its leadership

How would a low-cost price leader enforce its leadership through implied threats to a rival? How does a firm become a "low cost" price leader? Discuss the specific type of market structure that implied threat strategy ca ...

Assignmentthe soft drink and juice beverage industry is

Assignment The soft drink and juice beverage industry is very competitive with more companies entering the market each year. This week our case study is the Dr Pepper Snapple Group, a major player in the industry. Your a ...

Q1 garys labor supply is given by h -10 071428w where h

Q1. Gary's labor supply is given by H = -10 + 0.71428.w, where H is the hours worked per week and w is the hourly wage rate. Mary and Terry's labor supply functions are represented by H= -2 + 0.25.w and H= -38+1.7272.w, ...

Httpswwwyoutubecomwatchvkgsiduyw7wwhat was the promise of

https://www.youtube.com/watch?v=KGSID_Uyw7w What was the promise of capitalism? Discuss the important milestones and historical developments in economic theory and specify the contributions of each of the profits.

Assignmentwhat are the foundations of a comprehensive job

Assignment What are the foundations of a comprehensive Job Analysis? How do organizations utilize a Job Analysis Questionnaire? Does research support that a job analysis leads to an effective job description? Opine on ho ...

You have to watch a video in youtube the age of uncertainty

You have to watch a video in youtube :The Age of Uncertainty Episode 1 - The Prophets and Promise of Classical Capitalism link is: https://www.youtube.com/watch?v=KGSID_Uyw7w and then write a 3pages on answering these fi ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

A cola-dispensing machine is set to dispense 9 ounces of

A cola-dispensing machine is set to dispense 9 ounces of cola per cup, with a standard deviation of 1.0 ounce. The manuf

What is marketingbullwhat is marketing think back to your

What is Marketing? • "What is marketing"? Think back to your impressions before you started this class versus how you

Question -your client david smith runs a small it

QUESTION - Your client, David Smith runs a small IT consulting business specialising in computer software and techno

Inspection of a random sample of 22 aircraft showed that 15

Inspection of a random sample of 22 aircraft showed that 15 needed repairs to fix a wiring problem that might compromise

Effective hrmquestionhow can an effective hrm system help

Effective HRM Question How can an effective HRM system help facilitate the achievement of an organization's strate