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April 20, 2014

Homework Help: Economics

Posted by Bill on Thursday, February 8, 2007 at 2:16pm.

Derieve the demand for bonds.
Md=$Y(.35-i)
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.

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