Given money demand, by how much would the Moola central bank need to change the money supply to close the output gap?

When we look at the table we would actually see that Money supply amount of $500 equal the Money demand amount of $500 which means that the equilibrium interest rate will be 5 percent.

b. The level of investment at the equilibrium interest rate.

Since we have 5% as the equilibrium interest rate which means that the investment at the equilibrium interest rate will be $20.

c. If we look at table we are going to see that the potential GDP of the amount of $330 and the actual GDP of the amount of $350 are beside the interest rate of 5 percent and we could as well see that actual GDP is lower than potential GDP which means that there is negative recessionary GDP gap.

Hence,

Recessionary GDP gap= Actual GDP - Potential GDP

Recessional GDP gap=Actual GDP $330- Potential GDP=-$20

Therefore-$20 will be the recessionary GDP gap.

d. In order for us to eliminate the recessionary gap, so that actual GDP amount can equal potential GDP , this means we have to increase the money supply to the amount of $600 which will inturn lead to an increase of $100

e. Calculation for the expenditure multiplier,

Expenditure multiplier=(Potential GDP $350-Actual GDP $330)/($20-$10)

Expenditure multiplier=$20/10

Expenditure multiplier=$2

Therefore the Expenditure multiplier will be $2

sohail09753 sohail09753 · Answer 2 · 2021-11-20T10:43:18+01:00

The question is incomplete as the table is not given.

In economics, demand and supply are the most important factors for any business to analyze the market. There is an inverse relationship between demand and supply. If the demand is high and supply is low then there will be higher prices of the goods.

The Moola central bank needs to change the supply of money by increasing $100 to close the output gap.

Reason:

In order to make the actual GDP amount to be equal to the potential GDP, that means by increasing the money supply of $600 will give the effect of $100 for covering the gap.

To know more about demand and supply, refer to the link:

https://brainly.com/question/14741584