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Macroeconomics

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Moderate

Equilibrium in the Money Market

MACRO-HMB1GD

Suppose in the country of Pecunia the transaction demand for money is constant at $\$30$ million. The asset demand for money is zero if the interest rate is $12$ percent but increases by $\$10$ million for each two-percentage-point drop in interest rates. If the money supply is $\$70$ million, what is the equilibrium interest rate?

A

$2$ percent.

B

$4$ percent.

C

$6$ percent.

D

$8$ percent.

E

$10$ percent.