Macroeconomics
Macroeconomics
10th Edition
ISBN: 9780134896441
Author: ABEL, Andrew B., BERNANKE, Ben, CROUSHORE, Dean Darrell
Publisher: PEARSON
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Chapter 7, Problem 7NP

a)

To determine

Growth rate of nominal money supply

b)

To determine

Change in velocity

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Economics Suppose that the income elasticity of money demand is 0.4. Nominal interest rates do not change over time. If money supply increases by 20% every year, while real income only increases by 1%, what is the inflation rate?
The income elasticity of money demand is ny = 0.7 and the interest rate elasticity of money demand is n₁ = -0.06. Suppose that the central bank increases the money supply by 2.6%, real income increases by 2% and inflation is 3%. What is the percentage increase in the nominal interest rate? -0.3 (or -30%) 0.3 (or 30%) -0.1 (or -10%) 0.1 (or 10%)
The interest rate increases from 10% to 12% and GDP falls from 110 to 100 and money supply is growing by 2% - find the impact on inflation. What growth rate of money is required to have zero inflation. Income elasticity is 0.5 and interest rate elasticity is -0.1    Use the equation   delta p/p = delta Ms / Ms – (delta md/md)
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