# 6) Suppose an economy is in its long-run equilibrium and the real money demand function for...

###### Question:

6) Suppose an economy is in its long-run equilibrium and the real money demand function for the economy is (M/P) d =0.2Y. Now suppose suddenly money demand becomes (M/P) d =0.4Y.

a) Draw a graph and show the initial long-run equilibrium and then show the short-run equilibrium that would results from this change in money demand [Hint: You are drawing the graph from Chapter 10 but think about how this money demand change affects velocity from Chapter 5.]

b) Assuming policymakers take no action, how would the economy transition back to the long-run equilibrium? Show this on your graph from part a).

c) Briefly explain, could monetary policy change the money supply to offset this change in money demand? If so, how would they do that?

#### Similar Solved Questions

##### Relationship between this pair of compounds? Constitutional isomers, enantiomers, diastereomers, or identical compounds? CH3 CI Htci...
Relationship between this pair of compounds? Constitutional isomers, enantiomers, diastereomers, or identical compounds? CH3 CI Htci and Htci CH3 CI...
##### (1 point) Let B= [ 5 17 -5 -3 , | 4 11 If possible, compute...
(1 point) Let B= [ 5 17 -5 -3 , | 4 11 If possible, compute the following. If an answer does not exist, enter DNE. CB - A= help (matrices) CA help (matrices)...
##### 4) Identify three factors that influence the optimum cycle time for a traffic signal, indicating the...
4) Identify three factors that influence the optimum cycle time for a traffic signal, indicating the d incresingf ster e omum ode time 5) Identify three conditions that favor good signal progression on an arterial road 6) Identify three criteria related to queueing in evaluating a signalized interse...
##### 3. Using the attached excerpts from Coca Cola's 2018 Annual Report (financial statements and Note 8:...
3. Using the attached excerpts from Coca Cola's 2018 Annual Report (financial statements and Note 8: Property, Plant, and Equipment) answer the following questions. In addition: - All numbers are in Smillions (except per share data). - Provide calculations when necessary. a. Long-term Assets i) ...
##### Analysis of structure
Analysis of structure...
##### 4. Based on the information provided, evaluate whether this process can be expected to occur to...
4. Based on the information provided, evaluate whether this process can be expected to occur to a large extent at 25 °C (Hint: Express K, for the process and calculate its value). Substance SºlJ/mol K) O2(8) 161.1 0,(8) 238.9 NO(g) 211.2 NO:(8) 240.1 Ozone Formation: NO2(g), is formed by ch...
##### Need help
Two point charges, Q1 -27 µC and Q2 +50 µC areseparated by a distance of d = 12 cm. The electric field at the point P (see Fig.16-55) iszero. How far from Q1 is P? cmFigure 16-55...
##### Question 1 25 pts The cross-section area shown in the figure is symmetric about the y-axis....
Question 1 25 pts The cross-section area shown in the figure is symmetric about the y-axis. When b = 24", determine (a) the coordinates of the centroid (x, y), and (b) the moment of inertial about the centroidal axis x! The centroidal axis x'is parallel to x- axis and crosses through (X,Y). ...
##### The government now requires physicians to store patient information in databases that are accessible in multiple...
The government now requires physicians to store patient information in databases that are accessible in multiple locations by multiple people if they want to qualify for certain reimbursements. The rationale is that this will enable healthcare providers the ability to better serve their patients, as...
##### A company is formulating its plans for the coming year, including the preparation of its cash...
A company is formulating its plans for the coming year, including the preparation of its cash budget. Historically, the company's sales are 30% cash. The remaining sales are on credit with the following collection pattern: Collections on Account In the month of sale In the month following the sa...