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Annual domestic inflation rate

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Mexico currently has an annual domestic inflation rate of about 20 percent. Suppose that Mexico want to stabilize the floating market exchange-rate value of its currency(dollar/peso) in a world in which dollar prices are generally rising at 3 percent per year. What must the rate of inflation of domestic peso prices come down to? If the quantity theory of money holds a constant k,and if Mexican real output is growing b percent per year,what rate of money growth should the Mexican government try to achieve?

Reference no: EM132564868

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