The velocity of money is zero d lower interest rates

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Unformatted text preview: d B. the stock of money is determined by the central bank and does not change when the interest rate changes C. the velocity of money is zero D. lower interest rates result in lower opportunity costs of supplying money You are given the following information to answer the following question The money supply in the market is 400 + (50)i The demand for active balances is 250 The reserve ratio is 10% The banking system has deposits of 200 The banking system is fully loaned out The banking system will lend out all excess reserves The demand for idle balances is 350 – (50)i where i is the rate of interest 4. The equilibrium interest rate is A. 2% B. 6% C. 10% D. Cannot be calculated because the supply of money is not exogenous 5. The interest rate will rise when the A. demand for money decreases B. supply of money increases C. quantity of mon...
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This note was uploaded on 02/21/2013 for the course ECONOMICS 1011 taught by Professor - during the Spring '13 term at University of Cape Town.

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