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What is the income velocity of money

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Reference no: EM132200712

Question: The money demand function is as follows

(M/P)d = L( i, Y ) = Y/(5i)

a. If the production increases by g% and nominal interest is still, at what % would the real money balance increase?

b. What is the income velocity of money?

c. if inflation and nominal interest are still, at what % would the income velocity of money increase?

d. If interest rate is expected to increase, what effect would it have on the income velocity of money? And what effect on the increasing rate of the income velocity of money?

Reference no: EM132200712

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