Suppose the central bank of a country decides to increase the money supply by 10% in response
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Question:
Suppose the central bank of a country decides to increase the money supply by 10% in response to a recession. The current money supply is $1 trillion and the economy is in a liquidity trap with interest rates at 0%. If the velocity of money is constant, what will be the impact of this policy on nominal GDP? Show all your calculations.
Related Book For
International Economics Theory and Policy
ISBN: 978-0273754206
9th Edition
Authors: Paul R. Krugman, Maurice Obstfeld, Marc J. Melitz
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