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Standard money demand function

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Reference no: EM131507379

A standard 'money demand' function used by macroeconomists has the form ln(m) =β0+β1 ln(GDP) +β2R, where m is the quantity of (real) money, GDP is the value of (real) gross domestic product, and R is the value of the nominal interest rate measured in percentage point. Suppose β1= 1. 0β2=-0.02. What will happen to m if GDP increases by 2%? What will happen to m if the interest rate increases from 2% to 3%?

Reference no: EM131507379

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