Suppose the inflation rate is zero, the income elasticity of money demand is 0.75, and the interest elasticity of money demand is -0.25. Determine the inflation rate that results from each of the following events (starting back at zero for each one). Enter all answers as integers with no decimal places. If negative, be sure to include the minus sign before the number (no spaces).

Suppose the inflation rate is zero, the income elasticity of money demand is 0.75, and the interest elasticity of money demand is -0.25. Determine the inflation rate that results from each of the following events (starting back at zero for each one). Enter all answers as integers with no decimal places. If negative, be sure to include the minus sign before the number (no spaces).

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Question

Suppose the inflation rate is zero, the income
elasticity of money demand is 0.75, and the interest
elasticity of money demand is -0.25. Determine the
inflation rate that results from each of the following
events (starting back at zero for each one).
Enter all answers as integers with no decimal places.
If negative, be sure to include the minus sign before
the number (no spaces).
iii. The nominal interest rate rises from 5% to
6%.The
inflation rate is now
%?

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