Question

THIS IS MACRO ECON MATHPLEASE HELP!!!Use the accompanying graphs to show what happens in the economy when M increases from 300 billion to 400 billion. PLEASE SHOW WORKRound your response to one decimal place: C. Holding the price level constant, we would expect that if the multiplier is 1.5, the cumulative effect of this change in M on AD will be: $_____billion

Answer 1

The interest rate is inversely related to the quantity of money, i.e. as one goes up, the other comes down.

As M goes from 300bn to 400bn, the interest rate falls from 6% to 4%.