Suppose there’s a country where the velocity of money is constant. Real GDP grows by 6 percent per year, the money stock grows by 10 percent per…

  1. Suppose there’s a country where the velocity of money is constant.
  2.  Real GDP grows by 6 percent per year, the money stock grows by 10 percent per year, and the nominal interest rate is 7 percent.
  3. A) What is the real interest rate?
  4. B) What is the equation for real interest rate? How can we interpret this equation?
  5. C) What does the real interest rate tell us?
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