Suppose the real money demand function is Md/P =2400 +0.2 Y- 10,000 (r + pe). Assume M =5000, P =2.0, and pe=.03. If Ywere to increase from 4000 to 5000, then the real interest rate would increase by how many percentage points?
(a) 2
(b) 4
(c) 5
(d) 7
Answer: A
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