Consider the following equation aimed at estimating the demand for real cash balances in Mexico (standard errors in parentheses):

Where:

M_t = the money stock in year t (millions of pesos)

R_t = the long-term interest rate in year t (percent)

Y_t = the real GNP in year t (millions of pesos)

a. What economic relationship between Y and M is implied by the equation?

b. How are Y and R similar in terms of their relationship to M?

c. Does this equation seem likely to have serial correlation? Explain.