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28 Sep 2019
An economy has the following money demand function: (M/P) d 5 .2Y/i^½.
a. Derive an expression for the velocity of money. What does velocity depend on? Explain why this dependency may occur.
b. Calculate velocity if the nominal interest rate i is 4 percent.
c. If output Y is 1,000 units and the money supply M is $1,200, what is the price level P?
An economy has the following money demand function: (M/P) d 5 .2Y/i^½.
a. Derive an expression for the velocity of money. What does velocity depend on? Explain why this dependency may occur.
b. Calculate velocity if the nominal interest rate i is 4 percent.
c. If output Y is 1,000 units and the money supply M is $1,200, what is the price level P?
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Darryn D'SouzaLv10
28 Sep 2019
