Hw5 - AECO 301 Intermediate Macroeconomics Spring 2010...

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AECO 301 Intermediate Macroeconomics Spring 2010 Instructor: Yangyi Shan Homework Assignment 5 Due Day: Tuesday, April 20, 2010 at the beginning of lecture Instructions: Please write your name, student ID and session number on the first page. Please show your work. Please put your answers in the order of the questions Please staple your homework 1. (10 points) Money demand in an economy in which no interest is paid on money is M d / P = 500 + 0.2Y – 1000i. Suppose that P = 100, Y = 1000, and i = 0.10. Find real money demand, nominal money demand, and velocity. 2. (10 points) Consider an economy with a constant nominal money supply, a constant level of real output Y = 100, and a constant real interest rate r = 0.10. Suppose that the income elasticity of money demand is 0.5 and the interest elasticity of money demand is -0.1. a) By what percentage does the equilibrium price level differ from its initial value if output increases to Y = 106 (and r remains at 0.10)? b) By what percentage does the equilibrium price level differ from its initial value if the real interest
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This note was uploaded on 05/05/2010 for the course COM 4123 taught by Professor Ted during the Spring '10 term at SUNY Albany.

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Hw5 - AECO 301 Intermediate Macroeconomics Spring 2010...

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