A standard money demand function used by macroeconomists


A standard 'money demand' function used by macroeconomists has the form ln(m) =β0+β1 ln(GDP) +β2R, where m is the quantity of (real) money, GDP is the value of (real) gross domestic product, and R is the value of the nominal interest rate measured in percentage point. Suppose β1= 1. 0β2=-0.02. What will happen to m if GDP increases by 2%? What will happen to m if the interest rate increases from 2% to 3%?

Solution Preview :

Prepared by a verified Expert
Basic Computer Science: A standard money demand function used by macroeconomists
Reference No:- TGS02302937

Now Priced at $10 (50% Discount)

Recommended (95%)

Rated (4.7/5)