How the expected inflation rate equals the rate of nominal

Reference no: EM13236746

Assume that the demand for real money balance (M/P)= is M/p = 0.6Y-100i, where Y is national income and i is the nominal interest rate. The real interest rate r is fixed at 3 percent by the investment and saving functions. The expected inflation rate equals the rate of nominal money growth. If Y is 1000, M is 100 and the growth rate of nominal money is 1 percent, what must i and P be?

Reference no: EM13236746

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