Real money demand in the economy is given by
L = 0.3Y - 600i,
where Y is real income and i is the nominal interest rate. In equilibrium, real money demand L equals real money supply M/P. Suppose that Y equals 2000 and the real interest rate is 5%.
(a) At what rate of inflation is seignorage maximized?
(b) What is the maximum amount of seignorage revenue?
(a) 47.5%
(b) 135.375
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Which of the following statements about private and social costs is TRUE?
A) Social costs include externalities. B) Private cost do not include externalities. C) Social costs are never smaller than private costs. D) All of the above.
Which of the following is a reason why an American would demand British pounds?
a. To purchase British real estate b. To purchase Japanese semiconductors c. To purchase French government bonds d. To purchase stocks on the New York Stock Exchange e. To purchase a ticket to see a British film in the U.S.
More cattle are found to have mad cow disease. As a result, consumer confidence in the safety of beef is shaken. What would an economist predict will happen in the beef market?
A) As consumer preferences move away from beef, there is an upward movement along the beef demand curve. B) The demand curve will shift to the left. C) The demand curve does not shift but consumers move to a point lower down the curve. D) absolutely no change in either the quantity demand or the demand for beef
Which of the following is included in the calculation of national income?
A) compensation of employees B) rental income C) indirect business taxes D) all of the above E) none of the above