Suppose Real Money Demand Is L = 0

question 27

Multiple Choice

Suppose real money demand is L = 0.8 Y - 100,000 (r + π^e) .
If the nominal money supply is 12,000,real output is 15,000,the real interest rate is .02,and the expected inflation rate is .01,then the price level is

• A)3/4.
• B)1)
• C)4/3.
• D)3)

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Definitions:

Fixed Assets

Long-term tangible assets used in operations and not expected to be converted to cash in the short term, such as buildings and machinery.

Accumulated Depreciation

The cumulative depreciation expense recorded for an asset from the time it was brought into service.

Current Market Values

The present value of an asset or company based on what it could be sold for in the current market.

Replacement Costs

The current cost of replacing an asset with a new one of similar kind and quality at current prices.