Consider an economy in which aggregate real money balances is equal to 1,000,000 goods when the money

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Consider an economy in which aggregate real money balances is equal to 1,000,000 goods when the money stock is constant. However, the aggregate demand for real money balances is represented by Nq = 1,000,000 - z
a. Compute the amount of seigniorage that would be generated if the central bank set the money growth rate z = 2
b. What value of will result in no seigniorage revenue be collected? In other words, is there a money growth rate at which aggregate real money demand is zero?

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Modeling Monetary Economies

ISBN: 978-1107145221

4th Edition

Authors: Bruce Champ, Scott Freeman, Joseph Haslag

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