Suppose that Francie Pantsie sells designer jeans in Imaginville and earns a monthly salary of $1,000. Francie is paid on the Ist of each month, and by the 30th of each month she has exhausted her entire income. Francie spends $33.33/day. If the current monthly interest rate on bonds is 20% and Francie is charged $4 when she sells a bond, what is her optimal money balance? Manipulate point A on the graph to reflect the answer. How does her optimal balance change if the interest rate falls to 10%? Move point B on the graph to reflect the answer.

Suppose that Francie Pantsie sells designer jeans in Imaginville and earns a monthly salary of $1,000. Francie is paid on the Ist of each month, and by the 30th of each month she has exhausted her entire income. Francie spends $33.33/day. If the current monthly interest rate on bonds is 20% and Francie is charged $4 when she sells a bond, what is her optimal money balance? Manipulate point A on the graph to reflect the answer. How does her optimal balance change if the interest rate falls to 10%? Move point B on the graph to reflect the answer.

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter20: Monetary Policy

Section: Chapter Questions

Problem 3SQP

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