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Business, 03.04.2020 23:56 oof78

Suppose the real money demand function is

Md/P = 2400 + 0.2 Y ‐ 10,000 (r + π e).

Assume M = 5000, P = 2.0, and π 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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Answers: 2

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Suppose the real money demand function is

Md/P = 2400 + 0.2 Y ‐ 10,000 (r + π e).
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