Suppose real GDP is growing at 4 percentage , the money supply is growing at 11 percentage , the velocity of moey is costant and the real interest rate is 6 percentage.
What is the currect inflation rate and interest rate
1
Expert's answer
2012-09-13T11:58:27-0400
a) M/P=Y/V Y - growing by 4% so coefficient = 1.04 M - growing by 11% so coefficient = 1.11 V - constant =1 1.11/P=1.04/1 P=1.11/1.04≈1.067≈+6.7%
(b) M/P=Y/V Y - growing by 4% so coefficient = 1.04 M - growing by 15% so coefficient = 1.15 V - constant =1 1.15/P=1.04/1 P=1.15/1.04≈1.1057692≈+10.57%
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