Suppose the Real Money Demand Function Is

question 68

Multiple Choice

Suppose the real money demand function is
Md/P = 2400 + 0.2 Y - 10,000 (r + ?e) .
Assume M = 5000,?e = .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 Md/,?e,and Y are unchanged) ?

• A)4
• B)5
• C)9
• D)14

---

Definitions:

Misattribution of Arousal

A psychological phenomenon where a person mistakenly attributes their emotional or physiological state to the wrong source or cause.

Excitation Transfer

A psychological process where arousal generated by one stimulus is added to the arousal from a second stimulus, intensifying the overall emotional experience.

Downward Comparison

A psychological process where an individual compares themselves to others who are worse off in order to feel better about their own situation.

Upward Comparison

The act of comparing oneself to others who are perceived to be better off or superior in some way, which can affect self-esteem and motivation.