The income elasticity of money demand is ny = 0.7 and the interest rate elasticity of money demand is n; = -0.02. Suppose that the central bank increases the money supply by 5%, real income increases by 2% and inflation is 3%. What is the percentage increase in the nominal interest rate? O 0.3 (or -30%) O 0.3 (or 30%) O -0.1 (or -10%) O 0.1 (or 10%)

The income elasticity of money demand is ny = 0.7 and the interest rate elasticity of money demand is n; = -0.02. Suppose that the central bank increases the money supply by 5%, real income increases by 2% and inflation is 3%. What is the percentage increase in the nominal interest rate? O 0.3 (or -30%) O 0.3 (or 30%) O -0.1 (or -10%) O 0.1 (or 10%)

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter17: Capital And Time

Section: Chapter Questions

Problem 17.7P

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