QUESTION Consider the model of money demand we saw in class. Let the elasticity of money demand with respect to real income be 0.8 and the elasticity of money demand with respect to the interest rate on non-monetary assets be -0.2. Imagine that real income increased by 2.75% and nominal interest rate on non-monetary assets increased by 0.2%. If the central bank wants inflation to be at exactly 2%, it should increase money supply by percent. Note: Type in your answer rounded to two decimal places, i.e., your answer must be of the form "999.99". I will not be able to fix correct answers that were entered incorrectly, such as "999.999" or "999,99" or "999". In case the last digit in the correct answer is zero, e.g., "999.90" or "999.00", Blackboard may automatically delete it and you should not do anything about it. In case of percentages, do not type in the percentage symbol "%". If your answer is a negative number, type a dash in front of your answer, i.e, "-999.99".

QUESTION Consider the model of money demand we saw in class. Let the elasticity of money demand with respect to real income be 0.8 and the elasticity of money demand with respect to the interest rate on non-monetary assets be -0.2. Imagine that real income increased by 2.75% and nominal interest rate on non-monetary assets increased by 0.2%. If the central bank wants inflation to be at exactly 2%, it should increase money supply by percent. Note: Type in your answer rounded to two decimal places, i.e., your answer must be of the form "999.99". I will not be able to fix correct answers that were entered incorrectly, such as "999.999" or "999,99" or "999". In case the last digit in the correct answer is zero, e.g., "999.90" or "999.00", Blackboard may automatically delete it and you should not do anything about it. In case of percentages, do not type in the percentage symbol "%". If your answer is a negative number, type a dash in front of your answer, i.e, "-999.99".

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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