mojomadonna
New member
- Nov 15, 2008
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Suppose that velocity is constant and the long-run rate of economic growth is 3%. The money supply is growing 6% per year and the real interest rate is 2%.
a) What is the nominal interest rate?
b) If the Central Bank increases the money growth rate by 2% what is the change in nominal interest rate?
c) Suppose that the money demand function is represented by the equation (M/P)^d= 0.25 Y. What is the income velocity of money?
If you know how to do it can you please show your work. I know nominal interest rate= inflation rate+ real interest rate, but i left my book at school and I don't know how to calculate for inflation using the numbers provided...and this is the last question.
Thanks.
a) What is the nominal interest rate?
b) If the Central Bank increases the money growth rate by 2% what is the change in nominal interest rate?
c) Suppose that the money demand function is represented by the equation (M/P)^d= 0.25 Y. What is the income velocity of money?
If you know how to do it can you please show your work. I know nominal interest rate= inflation rate+ real interest rate, but i left my book at school and I don't know how to calculate for inflation using the numbers provided...and this is the last question.
Thanks.