By how much does the government increase its money supply

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Reference no: EM133494644

Problem: The money supply mt is expected to stay constant at mt = ¯M from t=0 on. At period 1, a government unexpectedly increase the money supply for seigniorage, and once it has increased the money supply at period 1, the money supply will stay constant at the level from period 1 onward. If the government wants to have a seigniorage amounting to b in real terms, by how much does the government increase its money supply? it is assumed that b < 1, and you don't have to convert mt to Mt.

Reference no: EM133494644

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