(Answered) Suppose a simple money economy can be described by the

Economics

Suppose a simple money economy can be described by the following equations. MV = PY Quantity Equation i = Eπ + r Fisher Equation (M/P) d = Y/10i Real Money Demand (M/P) s = 1000 Real Money Supply If real GDP is 1000.

a) What must the equilibrium nominal interest rate be?

b) What must the velocity of money be?

c) Suppose the quantity theory of money and classical dichotomy is true. If expected inflation increases by 1% or 0.01, what happens to the price level in this model?

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