Due Monday, October 19th, before the recitations. Please upload your answers to NYU Classes under the Assignments tab, or send your answers to Do Lee dql204@nyu.edu. Please complete the following

exercises from the main textbook (Abel, Bernanke, and Croushore). Question 1. a. By what percentage does the equilibrium price level differ from its initial value if output increases to Y = 106 (and r remains at 0.10)? (Hint: Use Eq. 7.12.) Chapter 7, Numerical Problem 5, pages 277-278, 8th ed; p. 275-276, 9th ed; p. 285, 10th ed.Consider an economy with a constant nominal money supply, a constant level of real output Y = 100,and a constant real interest rate r = 0.10. Suppose that the income elasticity of money demand is 0.5 and the interest elasticity of money demand is -0.1. c. Suppose that the real interest rate increases to r = 0.11. What would real output have to be forthe equilibrium price level to remain at its initial value? b. By what percentage does the equilibrium price level differ from its initial value if the real interest increases to r = 0.11 (and Y remains at 100)?