16.9 Return to Problem 16.6 and now assume that Smith and Jones conduct their exchanges in paper money. The total supply of such money is $60, and each individual wishes to hold a stock of money equal to -j of the value of transactions made per period.

a. What will the money wage rate be in this model? What will the nominal prices of X and Fbe?

b. Suppose the money supply increases to $90. How will your answers to part

(a) change?

Does this economy exhibit the classical dichotomy between its real and monetary sectors?