Chapter + (Module ]): 10 marks Our end-goal with this question is to derive the expected inflat economy described below. We'll start with the Money Supply and Money Demand curves M = 300 M'= PL(Y-,i] , where L[Y) is known as the Liquidity functic The description above says that, all else equal, money demand changes one-to-one with price level (if the price increase else equal, a person requires 10%% more money) is positively correlated with real GDP, Y (though not ne Is inversely correlated with the nominal interest rate Suppose the price level in the economy is 200, real GDP is 01 is described as L[Y, ]) = Yo5/10 01 The Supply of Savings curve and Investment Demand curves it described as: 5 = SOOM + NCI 10 = Kr-[1-d)K), where KD is the period's starting level of capit capital requirement, and d is the depreciation rate of capital. The equation for the Investment Demand function above sugg Investment has to compensate for depreciated capital as well needs going forward. SOON = 260 + 600r NCI = 200 + 400- KI = 725 - 3125r ; KD = 125 ; d = 20% (use d=0.20 in the equate Use all the information above to figure out the expected inflate economy. Draw the Money Market graph and the Loanable Fu below. Mark the axes. Point out the equilibria and equilibria va to find intercepts