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Real Money Demand in the Economy Is Given by L

Question 13

Multiple Choice

Real money demand in the economy is given by L = 0.3Y - 600 i,where Y is real income and i is the nominal interest rate.In equilibrium,real money demand L equals real money supply M/P.Suppose that Y equals 2000 and the real interest rate is 5%.At what rate of inflation is seignorage maximized?


A) 42.5%
B) 45.0%
C) 47.5%
D) 50.0%

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