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Consider the Money Demand Function That Takes the Form (M/P)d

Question 16

Multiple Choice

Consider the money demand function that takes the form (M/P) d = Y/4i, where M is the quantity of money, P is the price level, Y is real output, and i is the nominal interest rate. What is the average velocity of money in this economy?


A) i
B) 4i
C) 1/4i
D) 0.25

Correct Answer:

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