If the federal reserve bank wants to increase i by 10, Econometrics

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If the federal reserve bank wants to increase i by 10

Suppose that money demand is given by

where $Y is $100. Also, suppose that the supply of money is $20.

a. What is the equilibrium interest rate?

b. If the Federal Reserve Bank wants to increase i by 10 percentage points (e.g., from 2% to 12%), at what level should it set the supply of money?

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Econometrics: If the federal reserve bank wants to increase i by 10

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