Refer to the table for Moola given below to answer the following questions. What

Question

Refer to the table for Moola given below to answer the following questions. What is the equilibrium interest rate in Moola? percent. What is the level of investment at the equilibrium interest rate? $. Is there either a recessionary output gap (negative GDP gap) or an inflationary output gap (positive GDP gap) at the equilibrium interest rate and, if either, what is the amount? of $. Given money demand, by how much would the Moola central bank need to change the money supply to close the output gap? the money supply by $. What is the (expenditure) multiplier in Moola? .

Explanation / Answer

a.

The equilibrium interest rate is 7%, since at the rate Money supply = Money demand.

b.

The level of investment is $20, since this is the investment amount at 7% interest rate.

c.

GDP gap = Potential GDP – Actual GDP = $350 - $330 = $20

This is a necessary output gap or negative GDP gap of $20.

It happens because of not reaching the maximum efficiency.

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