Suppose that the household nominal income for an economy is ( 50,000) billion and the demand for

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Suppose that the household nominal income for an economy is $£ 50,000$ billion and the demand for money in this economy is given by

\[
M^{d}=£ Y(0.2-0.8 i)
\]

a. What is the demand for money when the interest rate is $1 \%$ and $5 \%$ ?

b. What will be the impact on the demand for money if the nominal income declines by $20 \%$ ?

c. What is the relationship between the demand for money and income? Money demand and the interest rate?

d. Explain what the central bank should do to interest rates if it needs to increase the demand for money.

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Macroeconomics

ISBN: 9781292160504

7th Global Edition

Authors: Olivier J. Blanchard

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Question Posted: Feb 29, 2024 03:01 AM

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Suppose that the household nominal income for an economy is ( 50,000) billion and the demand for

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Macroeconomics

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