Question

In the given scenario of the real money demand function, what is the value of real money demand when m = 3600, p = 2.0, πe = 0.01, and y = 5000?

a) 60
b) 120
c) 180
d) 240

Answer 1

The value of real money demand when m = 3600, p = 2.0, πe = 0.01, and y = 5000 is 3600.

So, the answer is not in the options.

Step-by-step explanation:

The given scenario involves the real money demand function, which can be represented as M = k * (p * y), where M represents the real money demand, k is a constant, p is the price level, and y is the real income. In this case, the values given are m = 3600, p = 2.0, πe = 0.01, and y = 5000. To find the value of real money demand, we can substitute these values into the formula:

M = k * (p * y) = k * (2.0 * 5000) = k * 10000

Since the value of m is given as 3600, we can set up an equation to solve for k:

k * 10000 = 3600

k = 0.36

Substituting this value back into the original equation:

M = 0.36 * 10000 = 3600

Therefore, the value of real money demand when m = 3600, p = 2.0, πe = 0.01, and y = 5000 is 3600.

So, the answer is not in the options