# Demand for real money balances worked out example

I was looking through some macroeconomic textbooks and came across a seemingly simple equation that derives the demand for real money balances, I also included the explanation for each part of the equation as per my textbook:

$$\frac{M^d}{P} = L(i) \times Y$$

• $$\frac{M^d}{P}$$ is demand for real money
• $$L(i)$$ is a decreasing function of the nomial interest rate $$i$$
• $$Y$$ is real income

I take the point that it makes intuitive sense that at lower interest rates, the demand for for real money will increase, but I don't see how we plug in the numbers to make this equation viable at the pragmatic level. Especially $$L$$, how do we even know how to get data on that to plug into the the equation?

## Question

Can someone provide a short worked out example using current data?

If I'm not mistaken, as of March 2019:

• $$i$$=2.5 (federal funds rate)
• $$Y$$ = 2.2 (2018Q4 Real GDP)
• $$L$$ = ??