Decided to increase the growth rate of the money supply

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Use the following information for the next 9 questions. You should draw a graph that depicts the situation below and use your picture to answer the questions. Assume that wages and prices are sticky and that we start at a long-run equilibrium. Assume that at this initial point, the growth rate of the money supply is 6%, the growth rate of the velocity of money is 3% and that the real economic growth rate is 4%. Now assume that the Federal Reserve has decided to increase the growth rate of the money supply by 8% and that the Federal Reserve leaves the growth rate of the money supply at this elevated rate.

Reference no: EM13984669

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