Question
Suppose that the growth rate of the money supply (M) is back at 7%, and the...
Suppose that the growth rate of the money supply (M) is back at 7%, and the growth rate of real GDP (Y) falls to 1%
§What is the new inflation rate (?π) in the economy?
§What is the new value of the nominal interest rate (i)?
§What must the Fed do if it wishes to keep ? π and i at the initial levels of 3% and 6%.
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