ECO 320 Money & Banking Homework Help Week 6

.Chapter 11

11. Using a spreadsheet program or a calculator, solve Tracy’s problem of how often to go to the ATM when the nominal interest rate on her bank account is 10 percent, she spends $30 each day, it costs her $0.50 each time she uses the ATM, and she thinks that there is a 15 percent chance that she will lose her cash or have it stolen.  Under these conditions, how often does Tracy go to the ATM, and how much cash does she take out each time? 

  

Chapter 12

   

12. Show the impact of a reduction in the money supply on the economy.  You may assume that the economy begins in long-run equilibrium.  Be sure to show the impact on output and the price level in both the short and the long run.