Problem 7.25

Consider the following simple demand function for money:

lnMt = £]0 + £]1Yt + £]2rt + Ut

Download:  0725.dat0725.xls

(a) Given the following data, estimate the elasticities of aggregate real cash balance with respect to
      the aggregate real income and the long term interest rate (Eviews)

(b) Estimate the modified regression model "ln(M/Y)t = lna + £]lnrt" (Eviews)(Rats)
 

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