(a)
Monetarist’s prediction on the rate of inflation.
(a)
Explanation of Solution
Even though it is hard to predict, if both the variables (growth in Money supply as well as growth in real
Inflation: Inflation is an increase in the general price level of goods and services in an economy over a period of time.
Real GDP: The real GDP is the inflation adjusted value of all final goods and the services produced in an accounting year.
(b)
Keynesian’s prediction on the rate of inflation.
(b)
Explanation of Solution
Assuming a Keynesian and Central bank activist, he would see the high money growth rate (as that in Japan) as the indicators of expansionary policies.
Real GDP: The real GDP is the inflation adjusted value of all final goods and the services produced in an accounting year.
Inflation: Inflation is an increase in the general price level of goods and services in an economy over a period of time.
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