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?

Question

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The Answer of 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?

Real Money Demand in the Economy Is Given by L