Question: 4 points. Suppose the Real Money Demand function is given by L(Y,i) = 500 + 0.4Y - 1000i Y = 1500, r=0.08, expected inflation =

4 points. Suppose the Real Money Demand function is given by L(Y,i) = 500 + 0.4Y - 1000i Y = 1500, r=0.08, expected inflation = 0, and P=50. a. Calculate the real money demand. (show work). b. Calculate the nominal money demand. (show work). c. If the market for money is in equilibrium, what is the real money supply? d. Now suppose expected inflation increases from 0 to 0.01. What is the impact on the Price Level? Calculate the new P. (show work)

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