question archive If bonds demand (Bd) is P = 1100-5Q, bonds supply (Bs) is P = 500+15Q, respective interest rate i* = (F-P)/P, assume F = 1000, money demand is L = 0
If bonds demand (Bd) is P = 1100-5Q, bonds supply (Bs) is P = 500+15Q, respective interest rate i* = (F-P)/P, assume F = 1000, money demand is L = 0
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If bonds demand (Bd) is P = 1100-5Q, bonds supply (Bs) is P = 500+15Q, respective interest rate i* = (F-P)/P, assume F = 1000, money demand is L = 0.8Y-62.5i and real money balance is $1500m with fixed prices. Each sub-question carries 2½ marks.
(a) Determine the interest rate using bonds market equations.
(b) Show financial market dynamics in (BsBd), (MsMd) and (ISLM) spaces.
(c) If IS was Y= 2240 -120r, derive the AD function if MP rule was r = 2 +0.5π
(d) Use ADAS to determine RGDP if Phillips Curve was π = 10 + 0.5(Y-Y*) + ρ, where Y* (Potential RGDP) was 1500 and ρ (financial friction) was 2%.
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