Amount of real interest on government bonds

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Let the real high-powered money (H / P), equals $4,585 billion, and the real government bond (B / P) equals $3,150 billion.

(a) If the rate of inflation is 5.5% what is the amount of seignorage (inflation tax)?

(b) What is the real interest rate if the nominal interest rate is 8.5%?

(d) What should be the maximum amount government budget deficit that keeps the real value of bonds and real high-powered money fixed?

(e) If real government spending is $1500 billion how much real taxes (net of transfer payment) government must collect that keeps real value of bonds and real high-powered money fixed?

Reference no: EM132078786

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