Suppose the real money demand function is Md/P =2400 +0.2 Y- 10,000 (r + pe).
Assume M =4000, P =2.0, pe=0.03, and Y =5000. The real interest rate that clears the asset market is
(a) 3%.
(b) 6%.
(c) 11%.
(d) 14%.
Answer: C
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