Determine the amount of teller cost in total and the average teller cost per transaction for a branch that processes 55,000, 65,
000, 75,000, or 85,000 transactions. In this case (the activity base is the number of transactions for a specific branch), is the teller cost a fixed or a variable cost?
1 answer:
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Answer: The nominal money supply should set at 1,600.
Explanation:
Given that,
Money demand function: (M/P)d = 2,200 – 200r
r - Interest rate
Money supply (M) = 2,000
Price level (P) = 2
If the fed wants to set the interest rate at 7% then,
Money supply = money demand
=
= 2,200 – 200r
P = 2 and r = 7%
= 2,200 – 200 × 7
M = 800 × 2
M = 1,600
The nominal money supply should set at 1,600.