posted by Bill on .
Derieve the demand for bonds.
Person's wealth is $50,000
Yearly Income is $60,000
I really have to idea on how to derieve the demand. Should I just put in the income($60,000) at $Y and solve the equation?
Daang, I thought my math was hard.
I don't know but wish you the BEST of luck.
Bill, I think you need more information. I presume your i is interest rate, which is missing.
They didn't give what the interest rate is. Would the equation then be Md=21000-60000i?
The Md equation is the demand for money. You are expected to derive the demand for bonds from this. The two are closely related. I would say:
Bd = $Y(ai)
where a > 0, because demand for bonds increases with the interest rate.