An economy has the following money demand function: (M/P)d=(0.2Y)/(i ^1/2) . (d)Let's say the expected inflation rate ha
Posted: Wed Jul 06, 2022 5:55 am
An economy has the following money demand function: (M/P)d=(0.2Y)/(i ^1/2) .
(d)Let's say the expected inflation rate has risen by 5 percentage points because a new central bank governor has been announced and the person has a reputation for being less strict about inflation. How much will the nominal interest rate change based on the idea of the Fisher effect? (Originally 4%)
(d)Let's say the expected inflation rate has risen by 5 percentage points because a new central bank governor has been announced and the person has a reputation for being less strict about inflation. How much will the nominal interest rate change based on the idea of the Fisher effect? (Originally 4%)