Suppose the Real Money Demand Function Is

question 98

Multiple Choice

Suppose the real money demand function is
Md/P = 2400 + 0.2 Y - 10,000 (r + ?e) .
Assume M = 5000,P = 2.0,and ?e = .03.If Y were to increase from 4000 to 5000,then the real interest rate would increase by how many percentage points?

• A)2
• B)4
• C)5
• D)7

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