Business, 07.04.2020 18:00 jahmya123

Suppose the real money demand function is

Md/P = 2400 + 0.2Y - 10,000 (r + πe).

Assume M = 5000, πe = .03, and Y = 5000. If the price level were to decrease from 2.5 to 2.0, then the real interest rate would decrease by how many percentage points (assuming Md, πe, and Y are unchanged)?

A) 4

B) 5

C) 9

D) 14

Answers: 3

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Suppose the real money demand function is

Md/P = 2400 + 0.2Y - 10,000 (r + πe).

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