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Questions › DSE › DSE 2019 › Q36
0 marksMacroeconomics › Demand for money and monetary theories › Real and nominal interest rates, and seigniorageModerateabout 2 min

DSE 2019 Question 36: Demand for money and monetary theories

What is the money demand function when the utility of money for the representative household is U(Y,M/P)=0.5ln⁡Y+0.5ln⁡(M/P)U(Y,M/P)=0.5\ln Y+0.5\ln(M/P)U(Y,M/P)=0.5lnY+0.5ln(M/P) (iii represents the opportunity cost of holding money)?

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What is the money demand function when the utility of money for the representative household is U(Y,M/P)=0.5ln Y+0.5ln (M/P) (i represents the opportunity cost of holding money)? (A) M^D/P=Y/(0.5i) (B) M^D/P=0.5Y/i (C) M^D/P=2Y/i (D) M^D/P=Y/i

Demand for money and monetary theories has come up 82 times in 7 exams since 2005.

What this question tests

This question is on Real and nominal interest rates, and seigniorage, part of Demand for money and monetary theories in Macroeconomics.

How inflation separates real from nominal returns, and the revenue the government earns by printing money.

TestStop has 16 past-paper questions on this subtopic; the nearest in year are below.

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Question from the DSE 2019 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.