- 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 year, and the nominal interest rate is 7 percent.
- A) What is the real interest rate?
- B) What is the equation for real interest rate? How can we interpret this equation?
- C) What does the real interest rate tell us?
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…
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