If the velocity of money is constant, money supply increases by 5%, output growth rate is 3%, and nominal interest rate is 5% then real interest rate is

Robust economic growth shifts the transactions demand for money. Consequently,growth will tend to either raise our interest rates or decrease those rates, and why?

When nominal interest rates on financial assets are low, the opportunity cost of holding money is ________, so the quantity of money demanded by households and firms will be ________.

Suppose the velocity of circulation (V) is constant. The annual growth rate of real GDP is 3%. The money supply grows by 5% per year. Suppose the nominal interest rate is 1%, how much is the real interest rate?

The government of a country increases the growth rate of the money supply from 5 percent per year to 50 percent per year.   a) What happens to prices?  b) What happens to nominal interest rate?  c) Why might the government be doing this?

Question 1-5. Answer True, False or Uncertain. Briefly explain your answer. 1. In an international economy of perfectly substitutable currencies, an increase in the stock of one countries money reduces real value of all monies. 2. The negative correlation between inflation and the real interest rate can be explained by the Fisher effect. 3. The rate of return equality holds in the model of illiquidity. 4. The rate of return equality is inconsistent with the observations found in the Equity Premium Puzzle. 5. Cooperative stabilisation can help countries have a fixed exchange rate regime and avoid high inflation.

An increase in the interest rate will cause an increase in the demand for money. True False

Suppose a country has a money demand function (M/P)ª = kY, where k is a constant parameter. The money supply grows by 12 percent per year, and real income grows by 4 percent per year. a. What is the average inflation rate? b. How would inflation be different if real income growth were higher? Explain. c. How do you interpret the parameter k? What is its relationship to the velocity of money? d. Suppose, instead of a constant money demand function, the velocity of money in this economy was growing steadily because of financial innovation. How would that affect the inflation rate? Explain.

Choose the option correct

If the money supply (M) is $300, the real GDP (Q) is 200, the velocity of money (V) is 6, the interest rates is 5% and the inflation rate is 3%, then calculate nominal GDP.