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Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383

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BuyFindarrow_forward

Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383
Textbook Problem

According to market monetarists, what problems might arise from a sharp decline in Nominal GDP?

To determine

The problems arising from decline in nominal GDP.

Explanation

When changes in the monetary policy results in reduction in the nominal GDP, it leads to a reduction in the nominal income. When there is a reduction in the national income, it implies that it becomes difficult for the individuals to pay off their debt. It is assumed that the income of a person is $100,000 in a year and has to be paid off in 5 years. The monthly payment is $2,000. It is also assumed that the nominal GDP reduces. This implies that the income of the individuals decrease and it becomes difficult for him to pay the monthly debt recovery of $2,000...

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