If velocity were predictable but not constant, would a monetary policy that fixed the growth rate of money work?
Answer to relevant QuestionsDescribe the impact of financial innovations on the demand for money and velocity. Why might targeting the money supply lead to lower output growth than targeting the rate of interest?. Countries A and B both have the same money growth rate and in both countries, real output is constant. In Country A velocity is constant while in Country B velocity has fallen. In which country will inflation be higher? ...Describe the determinants of the long-run real interest rate and speculate on the sort of events that would make it fluctuate. State whether each of the following will result in a movement along or a shift in the monetary policy reaction curve and in which direction the effect will be.(a) Policymakers increase the real interest rate in response to a ...
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