14 In Equation (6), suppose that the coefficients are estimated as a 5 0, b 5 20.05, and g 5 1. If the nominal interest rate were to rise by 1 percentage point and income were to fall by 3 percent, by what percent would the quantity of real money demanded change? If prices were to fall 1 percent, by what percent would the quantity of nominal money demanded change?

Analytical Problems