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4. (20 points) Suppose that the real demand for money is given by Md/P = 50 + .4Y 2000(r + are), where Y: 2000, and
4. (20 points) Suppose that the real demand for money is given by Md/P = 50 + .4Y 2000(r + are), where Y: 2000, and are = .02. a. (10 points) Draw an accurate graph of the relationship between the quantity of real money demanded (Md/P on the horizontal axis) and the real interest rate (r on the vertical axis). b. (10 points) Suppose that the value of the price level in the economy P=3, and the nominal money supply is given by M = 2100. Find the real interest when money market is in equilibrium
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