Suppose That in Mysore,the Reserve-Deposit Ratio Is

question 110

Multiple Choice

Suppose that in Mysore,the reserve-deposit ratio is
Res = 0.5 - 2i,
Where i is the nominal interest rate.The currency-deposit ratio is 0.2 and the monetary base equals 100.The real quantity of money demanded is given by the money demand function
L(Y,i) = 0.5Y - 10i,
Where Y is real output.Currently,the real interest rate is 5% and the economy expects an inflation rate of 5%.The money supply equals

• A)200.
• B)240.
• C)300.
• D)400.

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