Suppose that the real money demand function is: 0.01x Y L(Y,r+ ) = where Yis real output, ris the real interest rate, and s is the expected rate of infation. Real output is constant over time at Y= 250. The real interest rate is fixed in the goods market at r= 12% (0.12) per year. Suppose that the nominal money supply is growing at the rate of 10% (0.10) per year and that this growfth rate is expected to persist forever. Currently, the nominal money supply is M- 200. What is the value of the real money supply?O(ontor your rosponse rounded lo two decimal places) What is the value of the curent price level? (onter your response rounded to two decimal placee).
Suppose that the real money demand function is: 0.01x Y L(Y,r+ ) = where Yis real output, ris the real interest rate, and s is the expected rate of infation. Real output is constant over time at Y= 250. The real interest rate is fixed in the goods market at r= 12% (0.12) per year. Suppose that the nominal money supply is growing at the rate of 10% (0.10) per year and that this growfth rate is expected to persist forever. Currently, the nominal money supply is M- 200. What is the value of the real money supply?O(ontor your rosponse rounded lo two decimal places) What is the value of the curent price level? (onter your response rounded to two decimal placee).
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Suppose that the real money demand function is:
0.01XY
L(Y,r+ *) =
%3D
where Yis real output, ris the real interest rate, and is the expected rate of inflation. Real output is constant over time at Y= 250. The real interest rate is foxed in
the goods market at r= 12% (0.12) per year.
Suppose that the nominal money supply is growing at the rate of 10% (0.10) per year and that this growth rate is expected to persist forever. Currenty, the nominal
money supply is M- 200.
What in the value of the real money supply? (ontor your rosponse rounded to two decimal places).
What la the value of the current price level? (onter your response rounded to two decimal places).
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