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The world real interest rate is r =. 02. The foreign country has no money growth or real output growth, let us say. The home country is in equilibrium with no money growth and M = 21] (consider this trillions, if you want to be realistic). lfL =.8 and Y = 18 { trillions of2012 dollars), nd the equilibrium price level P, and the value of real money balances % in equilibrium. Now let the money supply increase to M2 = 24-. Find the new equilibrium P and %. Now let M begin to grow at the rate ,u =. 03. Find the new nominal interest rate in the home country. In the dynamic equilibrium, is M . . F bigger or smaller than the numbers you found above? Explaln