Macroeconomics 11th Edition by Michael Parkin

Exercise 35

The spreadsheet provides information about the demand for money in Minland. Column A is the nominal interest rate, r. Columns B and C show the quantity of money demanded at two values of real GDP: Y 0 is $10 billion and Y 1 is $20 billion. The quantity of money supplied is $3 billion. Initially, real GDP is $20 billion. What happens in Minland if the interest rate (i) exceeds 4 percent a year and (ii) is less than 4 percent a year?