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5. Assume that the economy has been growing at 2 % per year. You are an...

5. Assume that the economy has been growing at 2 % per year. You are an economist working at a Central Bank and need to establish what are the long-run effects of increasing the growth of the money supply to 10 % per year. State and then explain the long-run effects of this change on each of the following (give numerical estimates when possible):

a) The annual rate of inflation

b) The real interest rate

c) The nominal interest rate

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