For some reason Chegg keeps changing the image size that I see when i preview th
ID: 1130369 • Letter: F
Question
For some reason Chegg keeps changing the image size that I see when i preview the post. Just right click the picture and "open image in new tab". It will be visible.
A standard "money demand" function used by macroeconomists has the form In(m) = 0 + |ln(GDP) + 2R where rm 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 percent per year. Supposed that 31-1 15 and 2 =-0 07. What is the expected change in m if GDP increases by 10%? The value of m is expected to | by approximately 1% (Round your response to the nearest integer) What is the expected change in m if the interest rate increases from 2% to 7%? The value of m is expected to | by approximately % (Round your response to the nearest integer)Explanation / Answer
10 per cent increase in the value of GDP will increase the value of money demanded by 15.1 per cent.
Change in the value of interest rate = 5 per cent.
Increase in the value of interest rate by 5 per cent will decrease the value of money demanded by 0.07 * 5 = 0.35 per cent.