Business, 31.03.2020 01:04, lilyclairehutson

From the equation of exchange, M V = P Y , we know that spending growth ( −→ M + → v ) equals inflation π + Real growth. Recall from the chapter that in the long run (1) the inflation rate is found where the AD curve intersects the LRAS curve (reading off the vertical axis) and (2) the expected inflation rate is found where the short-run aggregate supply curve intersects the LRAS curve. With these things in mind, assume that the Solow growth rate is 3%. If spending growth equals 10%, what will π equal in the long run? What will E π equal?

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From the equation of exchange, M V = P Y , we know that spending growth ( −→ M + → v ) equals inflat...