The demand for real money balances is given by M over P equals Y over i, where M is the quantity of money, P is the pric

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The demand for real money balances is given by M over P equals Y
over i, where M is the quantity of money, P is the price level, Y
is output, and i is the nominal interest rate which is measured in
percent. At the beginning of the year, the nominal interest rate is
5%. Over the year, the monetary base increases by 4%, the money
multiplier DECREASES by 1%, the output increases by 2% percent, and
the nominal interest rate increases by 2 BASIS POINTS. (a) If the
ex ante real interest rate equals 0.5%, find the expected inflation
rate at the beginning of the year. (b) Calculate the percentage
change in the velocity of money. (c) [In answering this question,
you are allowed to use the approximations regarding percentage
changes; see page 4 of the math review (slide set 3).] Calculate
the actual inflation rate. (d) Is it true that purchasing power was
transferred from lenders to borrowers?