Equilibrium Interest Rate Calculation

What is the equilibrium interest rate based on the given table?

The equilibrium interest rate is 6 percent.

Calculating Equilibrium Interest Rate

In economics, the equilibrium interest rate is the rate at which the demand for money equals the demand for assets. To find this equilibrium point, we can refer to the table provided in the question:

1. For 2% interest rate:
Demand for Money = $300
Demand for Assets = $220
Not in equilibrium.

2. For 4% interest rate:
Demand for Money = $280
Demand for Assets = $260
Not in equilibrium.

3. For 6% interest rate:
Demand for Money = $260
Demand for Assets = $260
In equilibrium.

4. For 8% interest rate:
Demand for Money = $240
Demand for Assets = $220
Not in equilibrium.

Based on the analysis above, we can conclude that the equilibrium interest rate is 6 percent. This is the point at which the demand for money matches the demand for assets, creating a balance in the market. Therefore, the correct answer to the question is 6 percent.
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