00:01
Money supply is a total amount of money that is available in an economy in the form of liquid cash, bank deposits, or in any other form.
00:09
Money demand is the money demanded by individuals for business for consumption purposes and investment purposes.
00:17
From the given information, m, which is the money multiplier, has to be calculated by dividing one by the rr or the reserve deposit value.
00:32
So when we do this, we get m equals 1 divided by rr, and we're told rr is 0 .1.
00:40
So i get m equals 1 divided by 0 .1, which gives us 10.
00:46
So our money multiplier is 10.
00:49
So now to determine the money supply, i'm going to take this 10, and i'm going to multiply it by $83 billion, which is what we're told the monetary basis.
01:02
So i get 10 times 83, and this is in billions, and this gives us $830 billion for the money supply.
01:13
At equilibrium, money supply equals money demand.
01:27
So this gives us, the money supply is $830 billion, equals the money demand is $4 .7 trillion.
01:36
And we're going to multiply that by the money demand that we're given, which is 0 .82 minus $4 .7 trillion.
01:45
3 .2i.
01:50
And we can solve for i...