The demand for real money balances.

Question

Suppose that in the country of Eurasia, the velocity of money is constant. Real GDP grows at a rate of 2 percent per year, the money stock grows by 8 percent per year and the nominal interest rate is 9 percent. What is a. The growth rate of nominal GDP? b. The inflation rate? c. The real interest rate?

Answer 1

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Chapter 5, Problem 6QQ

To determine

The demand for real money balances.

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