The interest rate increases from 10% to 12% and GDP falls from 110 to 100 and money supply is growing by 2% - find the impact on inflation. What growth rate of money is required to have zero inflation. Income elasticity is 0.5 and interest rate elasticity is -0.1 Use the equation delta p/p = delta Ms / Ms – (delta md/md)
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The interest rate increases from 10% to 12% and
Use the equation
delta p/p = delta Ms / Ms – (delta md/md)
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- Economics Suppose that the income elasticity of money demand is 0.4. Nominal interest rates do not change over time. If money supply increases by 20% every year, while real income only increases by 1%, what is the inflation rate?3b. Suppose a country has a money demand function (M/P)d kY, where k is a constant parameter. The money supply grows by 12 percent per year, and real income grows by 4 percent per year. What is the average inflation rate?b. Suppose a country has a money demand function (M/P)d= kỲ, where k is a constant parameter. The money supply grows by 12 percent per year, and real income grows by 4 percent per year. What is the average inflation rate?
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- Example: Interest rate adjusted for inflation if the market interest rate is 10% and the overall inflation rate is 5%.Patricia knows she will have to repay a debt of $100,000. She also anticipates there will be some inflation soon. Under which of the following circumstances will Patricia pay back the least amount of money in real terms? The actual rate of inflation is less than the expected rate of inflation The actual rate of inflation equals the expected rate of inflation If the actual rate of inflation is greater than the expected rate of inflation We cannot determine this without knowing what interest rate she is paying There is no inflation at allSuppose the inflation rate is zero, the income elasticity of money demand is 0.75, and the interest elasticity of money demand is -0.25. Determine the inflation rate that results from each of the following events (starting back at zero for each one). Enter all answers as integers with no decimal places. If negative, be sure to include the minus sign before the number (no spaces). iv. Nominal money supply increases 5% and the interest rate rises from 5% to 10%.The inflation rate is now %? v. Nominal money supply increases 3%, the interest rate rises from 3% to 6%, and real income increases 16%. The inflation rate is now %?
