mm = money multiplier = .8
MB = monetary base = 2000
Money Demand: Md = P X [ a0 + .5 (Y) - 200 (i) ]
where: a0 = 800, Y = 2800
For simplicity we hold the price level fixed at 1 and assume that inflationary expectations are fixed at 2%. Y is also held constant in this problem.
What is the equilibrium interest rate (i)?
None of the above are correct
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