b) Assume that the demand for real money balances is:
MP = Y[0.6-(r+e)
Income, y =1000 real rate of intrest= 0.05
Expected inflation rate is e is constant 0.05
Calculate seinorage if the rate of growth of nominal money is 7%
1
Expert's answer
2021-08-03T09:43:05-0400
"MP= Y[0.6-(r+e)]"
"MP= 1000[0.6-(0.05+0.05)]"
"MP=500"
We find real interest rate when nominal growth rate is 7% =Nominal Rate+ Inflation Rate.
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