Suppose the money demand function is M^d/P = 1000 + 0.2Y - 1000i.
a. Calculate velocity if Y: 2000 and i = 0.10.
b. If the money supply (M^s) is 2600, what is the price level?
c. Now suppose the nominal interest rate rises to 0.15, but Y and M^sare unchanged. What happens to velocity and the price level? So if the nominal interest rate were to rise from 0.10 to 0.15 over the course of a year, with Y remaining at 2000, what would the inflation rate be?

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The Answer of Suppose the money demand function is M^d/P = 1000 + 0.2Y - 1000i. a. Calculate velocity if Y: 2000 and i = 0.10. b. If the money supply (M^s) is 2600, what is the price level? c. Now suppose the nominal interest rate rises to 0.15, but Y and M^sare unchanged. What happens to velocity and the price level? So if the nominal interest rate were to rise from 0.10 to 0.15 over the course of a year, with Y remaining at 2000, what would the inflation rate be?

Suppose the Money Demand Function Is Md/P = 1000

Suppose the Money Demand Function Is M^d/P = 1000