The money supply of a country has been growing for many years causing expected inflation of 8% per year. The economy’s current GDP growth rate is 1%. The Central Bank’s estimate of long term GDP growth rate is 3%. The “real” interest rate, r, is 4%. If the Central bank follows the Friedman rule policy, how fast should it grow the money supply? (answer should be an integer reflecting the %)
The money supply of a country has been growing for many years causing expected inflation of 8% per year. The economy’s current GDP growth rate is 1%. The Central Bank’s estimate of long term GDP growth rate is 3%. The “real” interest rate, r, is 4%. If the Central bank follows the Friedman rule policy, how fast should it grow the money supply? (answer should be an integer reflecting the %)
Chapter20: Monetary Policy
Section: Chapter Questions
Problem 4SQ
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The money supply of a country has been growing for many years causing expected inflation of 8% per year. The economy’s current
If the Central bank follows the Friedman rule policy, how fast should it grow the money supply?
(answer should be an integer reflecting the %)
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