Question: i. Write the quantity theory in growth rate (and solve for inflation, which is the theory of inflation equation) (2 points) ii. Write the Fisher

i. Write the quantity theory in growth rate (and solve for inflation, which is the theory of inflation equation) (2 points) ii. Write the Fisher equation (2 points) Now, use the quantity theory in growth rate, the Fisher equation, and the theory of inflation equation to analyze the impact of a reduction in money supply growth (H) on: iii. Inflation (3 points) iv . nominal interest rates (3 points) V . money demand (3 points) vi. demand for bonds (3 points) vii. real interest rates (3 points) viii. real GDP growth (3 points) ix. consumption and investment. (3 points) b. What is the Classical dichotomy or money neutrality? How is it related to the determination of real interests and real GDP? Why is morley neutral in the long run? (4 points) c. Suppose that an airplane flights over Riverside and drops 800 million dollars in the streets. According to the classical theory, what happens to prices, nominal output, real output, nominal and real interest rates in Riverside in the long run? (5 points) MacBook Pro DII DD FB F9 F10 888 F5 F3 FA F6 F7
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
