Essay
Real money demand in the economy is given by
L = 0.3Y - 600i,
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%.
(a)At what rate of inflation is seignorage maximized?
(b)What is the maximum amount of seignorage revenue?
Correct Answer:
Verified
Correct Answer:
Verified
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