Assume That the Demand for Real Money Balance (M/P) Is $Y$

question 76

Essay

Assume that the demand for real money balance (M/P) is M/P = 0.6Y - 100i, where Y is national income and i is the nominal interest rate (in percent). The real interest rate r is fixed at 3 percent by the investment and saving functions. The expected inflation rate equals the rate of nominal money growth. a. If $Y$ is $1,000 , M$ is 100 , and the growth rate of nominal money is 1 percent, what must $i$ and $P$ be?
b. If $Y$ is $1,000 , M$ is 100 , and the growth rate of nominal money is 2 percent, what must $i$ and $P$ be?

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Definitions:

Successful Minority

Describes a subgroup within a larger population that achieves a higher level of success compared to the average, often despite facing systemic barriers.

Principled

Acting in accordance with morality and showing recognition of right and wrong.

Disrupt

To interrupt by causing a disturbance or problem, significantly altering or destabilizing the status quo.

Ingroup Minority

A smaller subset within a larger group that may hold different views or characteristics from the majority of the group.