The income elasticity of real money demand is 0.75, and the interest elasticity of real money demand is -0.1. Income (Y) is expected to grow by 3% over the next few years, and the nominal interest rate (i) is expected
to grow by 2.5% over the next few years.

a. By how much is real money demand expected to grow over the next few years?

b. Given the information provided above, if the Federal Reserve plans to grow the money
supply by 4% over the next few years, what inflation rate could be expected over the same time
period?