Economics (MindTap Course List)
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Economics (MindTap Course List)
According to market monetarists, what problems might arise from a sharp decline in Nominal GDP?
The problems arising from decline in nominal GDP.
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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