The income elasticity of money demand is ny = 0.7 and the interest rate elasticity of money demand is n₁ = -0.06. Suppose that the central bank increases the money supply by 2.6%, real income increases by 2% and inflation is 3%. What is the percentage increase in the nominal interest rate? -0.3 (or -30%) 0.3 (or 30%) -0.1 (or-10%) 0.1 (or 10%)

The income elasticity of money demand is ny = 0.7 and the interest rate elasticity of money demand is n₁ = -0.06. Suppose that the central bank increases the money supply by 2.6%, real income increases by 2% and inflation is 3%. What is the percentage increase in the nominal interest rate? -0.3 (or -30%) 0.3 (or 30%) -0.1 (or-10%) 0.1 (or 10%)

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter12: Money Growth And Intlation

Section: Chapter Questions

Problem 6PA

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