Suppose that the household nominal income for a country is 50.000 billion. The money demand function...

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Suppose that the household nominal income for a country is €50.000 billion. The money demand function is given by Md¹= €Y(0.2-0.81) a. What is the demand for money when the interest rate is 1%? 5%? b. What is the relationship between money demand and income? Money demand and the interest rate? c. Suppose the yearly income is reduced by 20%. In percent- age terms, what happens to the demand for money if the interest rate is 1%? If the interest rate is 5%? d. What should a central bank do to interest rates if it needs to increase money demand? Suppose that the household nominal income for a country is €50.000 billion. The money demand function is given by Md¹= €Y(0.2-0.81) a. What is the demand for money when the interest rate is 1%? 5%? b. What is the relationship between money demand and income? Money demand and the interest rate? c. Suppose the yearly income is reduced by 20%. In percent- age terms, what happens to the demand for money if the interest rate is 1%? If the interest rate is 5%? d. What should a central bank do to interest rates if it needs to increase money demand?

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