The income elasticity of money demand is 2/3 and the interest elasticity of money demand is -0.1.
Question:
a. If the central bank wants zero inflation over the next year, then what growth rate of the nominal money supply should it choose?
b. By how much will velocity change over the next year if the central bank follows the policy that achieves zero inflation?
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Related Book For
Macroeconomics
ISBN: 978-0321675606
6th Canadian Edition
Authors: Andrew B. Abel, Ben S. Bernanke, Dean Croushore, Ronald D. Kneebone
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