What are your thoughts on below scenarios:-

2 - part (a)

You are the governor of the South African central bank. Your staff has compiled the following facts using data for the past 10 years:

• Inflationhas been on average 7.50 percent per year;
• Real GDPgrows on average 2 percent per year; and
• Thenominalinterest rate on 10-year government bonds is 8.50 percent per year.

Use the quantity theory of money to compute theaverage growth rate of moneyin the economy.

Note: present your result in percentage and with two decimal places. For example, if the result is 14.578%, you should write 14.58.

2 - part (b)

You are the governor of the South African central bank. Your staff has compiled the following facts using data for the past 10 years:

• Inflationhas been on average 7.50 percent per year;
• Real GDPgrows on average 2 percent per year; and
• Thenominalinterest rate on 10-year government bonds is 8.50 percent per year.

Use the Fisher equation to compute thereal interest ratein the economy.

Note: present your result in percentage and with two decimal places. For example, if the result is 14.578%, you should write 14.58.

2 - part (c)

You are the governor of the South African central bank. Your staff has compiled the following facts using data for the past 10 years:

• Inflationhas been on average 7.50 percent per year;
• Real GDPgrows on average 2 percent per year; and
• Thenominalinterest rate on 10-year government bonds is 8.50 percent per year.

What action do you need to take to permanentlyincreasethe long-run rate of inflation?

• Lower permanently the growth rate of money.
• Raise permanently the growth rate of money.
• Lower temporarily the growth rate of money.
• Raise temporarily the growth rate of money.

2 - part (d)

You are the governor of the South African central bank. Your staff has compiled the following facts using data for the past 10 years:

• Inflationhas been on average 7.50 percent per year;
• Real GDPgrows on average 2 percent per year; and
• Thenominalinterest rate on 10-year government bonds is 8.50 percent per year.

What is the value of the growth rate of money consistent with a long-run inflation of 10 percent?

Note: present your result in percentage and with two decimal places. For example, if the result is 14.578%, you should write 14.58.

2 - part (e)

You are the governor of the South African central bank. Your staff has compiled the following facts using data for the past 10 years:

• Inflationhas been on average 7.50 percent per year;
• Real GDPgrows on average 2 percent per year; and
• Thenominalinterest rate on 10-year government bonds is 8.50 percent per year.

Suppose that the real interest rate in the economy was 2 percent. What is the long run-value of thenominalinterest rate associated with a long-run inflation of 10 percent, keeping the real interest rate constant?

Note: present your result in percentage and with two decimal places. For example, if the result is 14.578%, you should write 14.58.