Suppose is constant, M is growing 5% per year, Y is growing 2% per year, and...

 

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Suppose is constant, M is growing 5% per year, Y is growing 2% per year, and r = 4. a. Solve for i (the nominal interest rate). b. If the Fed increases the money growth rate by 2 percentage points per year, find Ai. c. Suppose the growth rate of Y falls to 1% per year. What will happen to inflation (7)? What must the Fed do if it wishes to keep a constant? Suppose is constant, M is growing 5% per year, Y is growing 2% per year, and r = 4. a. Solve for i (the nominal interest rate). b. If the Fed increases the money growth rate by 2 percentage points per year, find Ai. c. Suppose the growth rate of Y falls to 1% per year. What will happen to inflation (7)? What must the Fed do if it wishes to keep a constant?

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Answer a First inflation 52 3 i 43 7 b Ai 2 It would be sa... View the full answer