Fishers equation-crowding out effect

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Reference no: EM1311747

1- In the country of Wiknam, the velocity of money is constant. Real GDP grows by 5 percent per year, the money stock grows by 14 percent per year, and the nominal interest rate is 11 percent. What is the real interest rate?

2- Briefly explain the meaning of "the full-crowding out" and "the neutrality of money" in the Classical model. What do they imply about the effectiveness of government policies to improve the economic performance of a country?

Reference no: EM1311747

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