The income elasticity of money demand is 2/3 and the interest elasticity of money
demand...
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The income elasticity of money demand is 2/3 and the interest elasticity of money
demand is -{}.1. Real income is expected to grow by 4.5% over the next year, and
the real interest rate is expected to remain constant over the next year. The rate of
inflation has been zero for several years. (a) If the central bank wants zero inflation over the next year, what growth rate of
the nominal money supply should it choose? Growth rate of the nominal money supply: (b) By how much will velocity change over the next year if the central bank follows
the policy that achieves zero inflation? Change in velocity:
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Answers: 3
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