Question: Can you help me understand how to work this problem? Assume that the demand for real money balance (M/P) is M/P = 0.6Y - 100i,

Can you help me understand how to work this problem?

Assume that the demand for real money balance (M/P) is M/P = 0.6Y - 100i, where Y is national income and i is the nominal interest rate (in percent). The real interest rate r is fixed at 3 percent by the investment and saving functions. The expected inflation rate equals the rate of nominal money growth.

If Y is 1,000, M is 100, and the growth rate of nominal money is 1 percent, what must i and P be?

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