1
answer
3
watching
2,269
views
28 Sep 2019
Suppose a country has a money demand function (M/P)d= kY, where k is a constant parameter. The money supply grows by 12per year, and real income grows by 4 per cent per year.
a) What is the average inflation rate?
b) How would inflation be different if real income growth were higher? Explain.
c) 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.
Suppose a country has a money demand function (M/P)d= kY, where k is a constant parameter. The money supply grows by 12per year, and real income grows by 4 per cent per year.
a) What is the average inflation rate?
b) How would inflation be different if real income growth were higher? Explain.
c) 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.
Nusrat FatimaLv10
28 Sep 2019
