Answer on Macroeconomics Question for Tasia
Consumers are very optimistic about the future.
The price of oil has just doubled.
The money supply is growing at a 6% rate.
The government has just cut spending by 8%. Firms are doubling their investment.
The trade deficit has doubled in the last 6 months.
Calculate the long-run rate of inflation.
Economists generally agree that in the long run, inflation is caused by increases in the money supply.
So, in our case long-run inflation will be 6% per year.
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