Homework Answers
a) False, there is no relation between inflation and nominal rate, but an increase in the inflation rate will decrease the real interest rate.
b) True, in the long run, the classical dichotomy works as the money only affects the nominal variables in the market. leaving the real variables as it is.
c) 1000 = 50x40
= 1000v = 2000.
V = 2. Answer is "D" nominal variable 2000 and velocity is 2.
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known as (the classical dichotomy, price neutrality, or the
quantity theory?).
The horizontal axis of the model of aggregate demand...
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quantity theory?).
The horizontal axis of the model of aggregate demand...
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