- Please Answer Part C Of The Question 1 (108.29 KiB) Viewed 30 times
Please answer part C of the question
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Please answer part C of the question
Please answer part C of the question
Consider an economy with a constant nominal money supply, a constant level of real output Y = 250, and a constant real interest rate r = 5%. Suppose that the income elasticity of money demand is 1.20 and the interest elasticity of money demand is – 0.05. a. By what percentage does the equilibrium price level differ from its initial value if output increases to Y = 275.00 (and r remains at 5%)? %AP= -12 (enter your result as a percentage rounded to two decimal places). b. By what percentage does the equilibrium price level differ from its initial value if the real interest increases to r= 5.50% (and Y remains at 250)? %AP = 0.5 (enter your result as a percentage rounded to two decimal places). c. Suppose that the real interest rate increases to r= 5.50%. By what percentage would real output have to increase for the equilibrium price level to remain at its initial value? %AY = (enter your result as a percentage rounded to two decimal places).
Consider an economy with a constant nominal money supply, a constant level of real output Y = 250, and a constant real interest rate r = 5%. Suppose that the income elasticity of money demand is 1.20 and the interest elasticity of money demand is – 0.05. a. By what percentage does the equilibrium price level differ from its initial value if output increases to Y = 275.00 (and r remains at 5%)? %AP= -12 (enter your result as a percentage rounded to two decimal places). b. By what percentage does the equilibrium price level differ from its initial value if the real interest increases to r= 5.50% (and Y remains at 250)? %AP = 0.5 (enter your result as a percentage rounded to two decimal places). c. Suppose that the real interest rate increases to r= 5.50%. By what percentage would real output have to increase for the equilibrium price level to remain at its initial value? %AY = (enter your result as a percentage rounded to two decimal places).
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