Get the quarterly data from 1962 to 2009 on real GDP (CANSIM series 41707150), the GDP deflator (series V1997756), the monetary base (series V37145), and the three-month T-Bill rate (series V122531) from the Textbook Resources area of the MyEconLab. Run a regression of real money balances on a constant real GDP and the nominal interest rate.

a. Comment on the fit of the regression.

b. What is the estimated income elasticity of the demand for real money balances? What is the estimated interest rate elasticity?

c. Are your estimates in (b) statistically significant?

d. Is your evidence consistent with the Baumol- Tobin model or with the quantity theory of money?

e. Is the money demand relationship stable?