Business, 24.06.2020 22:01 daymakenna3

Let's go back to the fall of 2008 when we were at the height of the financial crisis. Pretend you are steering the cruise ship and your goal is to keep interest rates steady in the money market. For simplicity, we hold the price level fixed at 1 and assume that inflationary expectations are fixed at 2%. Initial Conditions before the fall of 2008.mm = money multiplier = 1.6 MB = monetary base = 1000 Money Demand Md = PX [ao + .5 (Y)-200 (i)] Md = 1 X [ 200+.5 (3600)- 200 (0)] Solve for the money market clearing rate of interest. Now draw a money market diagram labeling this initial equilibrium in the money market.

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Let's go back to the fall of 2008 when we were at the height of the financial crisis. Pretend you ar...