QUESTION 27 O the Theory of Rational Expectations e the Theo

QUESTION 27 O the Theory of Rational Expectations e the Theory of Adaptive Expectations QUESTION 28 QUESTION 29 Y 500-20

28)

money demand (M/P)^d = 600 - 100r

money supply (M/P) = 1600/4

= 400

Money market is in equilibrium at

money demand = money supply

600 - 100r = 400

600 - 400 = 100r

200 = 100r

200/100 = r

r = 2

so equilibrium interest rate is 2%