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Assume That the Money Demand Function Is (M / P)d

Question 16

Multiple Choice

Assume that the money demand function is (M / P) d = 2,200 - 200r, where r is the interest rate in percent. If the price level is fixed at P = 2, and the Bank of Canada wants to fix the interest rate at 7 percent, it should set the money supply at:


A) 2,000.
B) 1,800.
C) 1,600.
D) 1,400.

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