Reference no: EM132471803

In South Korea over the past several years, the real GDP, Y, of has been growing by 3 percent per year and the price level, P, also by 3 percent (that is, DP/P = 0.03 and DY/Y = 0.03). The nominal interest rate, i, has remained constant, the money market has been in equilibrium, and money demand can be represented by M^d = kPY/i, where k is a constant parameter. The money market equilibrium implies M^s= kPY/i, where M^s is the money supply. For the purposes of this question, please use the growth form of the equation for the money market equilibrium, DM^s/M^s @ DP/P + DY/Y - Di/i, which is a close approximation of the original because the growth rates are small numbers.

At what rate has the South Korean money supply been growing (i.e., what is DM^s/M^s)? Please show your calculations