What is the equilibrium level on investment

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Reference no: EM131090937

Consider an economy with a money demand curve given by Dm = 10,000 – 4000r.

a) If the money supply in the economy (Sm) is 6,000, then what is the equilibrium interest rate and quantity of money?

b) If (gross) investment demand is given by ID = 20,000 – 200r, then what is the equilibrium level on investment?

c) In a private closed economy, where AE = C + Ig and C = 10,000 + 0.8 Y, what is the equilibrium level of real GDP in the immediate short run?

d) In the immediate short run, how much does real GDP change when the Bank of Canada increases the money supply from 6,000 to 7,000? Is this monetary policy contractionary or expansionary?

Reference no: EM131090937

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