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Answer :
The money demand equation, money supply, and the fact that the money market is in balance, we need to calculate the level of income (Y) when the interest rate (R) is 10%. The options provided are A. 59620, B. 112050, C. 149050, and D. 23848.
To find the level of income (Y) when the interest rate (R) is 10%, we can start by setting the money demand (L) equal to the money supply. In this case, the equation becomes:
L = 400 + 0.4Y - 200R
Since the money market is in balance, the money supply is equal to the money demand:
60000 = 400 + 0.4Y - 200(0.1)
Simplifying the equation, we have:
60000 = 400 + 0.4Y - 20
Combining like terms, we get:
0.4Y = 59620
To find Y, we divide both sides by 0.4:
Y = 59620 / 0.4
Calculating this, we find Y = 149050.
Therefore, the correct option from the given choices is C. 149050, as it represents the level of income (Y) when the interest rate (R) is 10%.
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