The demand for money in a country is given by ๐‘€๐‘‘=10,000โˆ’10,000๐‘–+๐‘Œ

Where ๐‘€๐‘‘ is money demand in dollars, ๐‘– is the interest rate (a 10 percent interest rate means

10100=0.1), and ๐‘Œis national income. Assume ๐‘Œ=$5000 initially.

Suppose the central bank wishes to keep the interest rate at the initial rate when the national income was $5000. By how much should it increase the supply of money, given the new national income of $7,500 and $10,000. Draw the long run endogenous money supply function.

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