4. Consider an economy with a constant nominal money supply, a constant level of real output ¥ = 100, and a constant real interest rate r = 0.10. Suppose that the income elasticity of money demand is 0.5 and the interest elasticity of money demand is ~0.1

a. By what percentage does the equilibrium price level differ from its initial value if output increases to ¥ = 106 (andr remains at 0.10)? (Hint: Use Eq. 7.11)

b. By what percentage does the equilibrium price level differ from its initial valueif the real interest rate inereases to r = 0.11 (and ¥remains at 100)? ¢. Suppose that the real interest rate increases to + = 0.11. What would real output have to be in order for the equilibrium price level to remain at its initial value?