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# Answer to Question #14228 in Economics of Enterprise for tobias

Question #14228
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
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&asymp;1.067&asymp;+6.7%

r-real interest rate
i-nominal interest rate
&pi;-inflation
(1+r)=(1+i)/(1+&pi;)
1.06=(1+i)/(1+0.067)
i=(1.06*1.067)-1
i&asymp;0.13102&asymp;13.10%
______ ______ ______ ______

(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&asymp;1.1057692&asymp;+10.57%

r-real interest rate
i-nominal interest rate
&pi;-inflation
(1+r)=(1+i)/(1+&pi;)
1.06=(1+i)/(1+0.1057)
i=(1.06*1.1057)-1
i&asymp;0.1720&asymp;17.20%
______ ______ ______ ______

i&sup1;&asymp;13.10%
i&sup2;&asymp;17.20%
&Delta;i=(17.20/13.10)-1&asymp;
&asymp;1.3129-1&asymp;+31.29%

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