In an economy at its steady state, real GDP, Y, increases at the rate g+n, where g is the technological growth rate and n is the rate of population growth. The monetary base M is equal to nominal GDP divided by the velocity of money V i.e. M = PY/V where P is the price level. Thus, assuming the velocity of money is constant, the growth rate of the monetary base will be (approximately) = +9+n where is the inflation rate. The velocity of money is determined by the function V = Vebi The nominal interest rate i is determined by i = ym + T, where the natural real interest rate r is constant in steady state and taken as given. Assume that n=0,9 = 0.03, r" = 0.05, b = 1, and V = 20. (a) What is the seignorage as a fraction of nominal GDP, when inflation is n = 0.01? (b) What is the seignorage as a fraction of nominal GDP, when inflation is n = 0.10? (c) What rate of inflation a maximizes scignorage? (d) What is the maximal seignorage as a fraction of nominal GDP? In an economy at its steady state, real GDP, Y, increases at the rate g+n, where g is the technological growth rate and n is the rate of population growth. The monetary base M is equal to nominal GDP divided by the velocity of money V i.e. M = PY/V where P is the price level. Thus, assuming the velocity of money is constant, the growth rate of the monetary base will be (approximately) = +9+n where is the inflation rate. The velocity of money is determined by the function V = Vebi The nominal interest rate i is determined by i = ym + T, where the natural real interest rate r is constant in steady state and taken as given. Assume that n=0,9 = 0.03, r" = 0.05, b = 1, and V = 20. (a) What is the seignorage as a fraction of nominal GDP, when inflation is n = 0.01? (b) What is the seignorage as a fraction of nominal GDP, when inflation is n = 0.10? (c) What rate of inflation a maximizes scignorage? (d) What is the maximal seignorage as a fraction of nominal GDP