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Suppose the Real Money Demand Function Is Md/P = 2400

question 54

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Suppose the real money demand function is Md/P = 2400 + 0.2Y - 10,000 (r + πe) .
Assume M = 5000,πe = .03,and Y = 5000.If the price level were to decrease from 2.5 to 2.0,then the real interest rate would decrease by how many percentage points (assuming Mde,and Y are unchanged) ?


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