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johnpaul92 johnpaul92
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8 years ago
Suppose the money demand function is given by
   M to power of ((d))/P = 640 + 0.1Y - 5000 (r + π to power of ((e))).
Suppose the central bank changes the nominal money supply depending on income and inflation:
   M to power of ((s)) = 1000 + 0.1Y - 4000π.
(a)   If expected inflation equals actual inflation = 0.03, Y = 1000, and r = 0.02, calculate the price level.
(b)   If inflation rises to 0.04 while the other variables remain as in part a, calculate the price level.
(c)   If expected inflation rises to 0.04 while the other variables remain as in part a, calculate the price level.
(d)   If the real interest rate rises to 0.03 while the other variables remain as in part a, calculate the price level.
Textbook 
Macroeconomics

Macroeconomics


Edition: 8th
Authors:
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supamansupaman
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8 years ago
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johnpaul92 Author
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#2
8 years ago
Appreciate your help, thank you again
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#3
8 years ago
Every little bit helps, right? Glad I solved your question
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