Illustrate what is the average inflation rate

Assignment Help Business Economics

Reference no: EM1353912

Suppose a country has a money demand function (M/P)^d = kY, where k is a constant parameter. The money supply grows by 12 per year, and real income grows by 4 percent per year.

a. What is the average inflation rate?

b. Explain how would inflation be different if real income growth were higher? Explain.

c. Suppose, instead of a constant money demand function, the velocity of money is this economy was growing steadily because of financial innovation. How would that affect the inflation rate? Explain.

Reference no: EM1353912

Questions Cloud

Describe who bears relatively more of the burden of the tax : Describe who bears relatively more of the burden of the tax, producers or consumers and illustrate your answer with a diagram.

Find the magnetic field outside the cable : A 250 gram sample of a metal is warmed from 60 degrees celcius to 85 degrees celcius when 1000 cal are added. What is the specific heat constant of the metal.

Step-wise answer to organizational culture : What are some of the things a person can take from organizational culture and apply that to shifting from bottom-line,

Organizations reward and motivation : Can rewards be ineffective, and actually reduce or inhibit productivity/performance? If so, how? Provide an example to support your response.

Illustrate what is the average inflation rate : What is the average inflation rate. Explain how would inflation be different if real income growth were higher.

Explain what type of global model you would recommend : Explain what type of global model you would recommend to create a cohesive culture where your foreign counterparts and employees feel valued

Culture and multiculturalism : Culture and Multiculturalism and examine the concept of culture and how it is used to construct group identity

What is the net force on any one of the masses : The bucket is released from rest at the top of a well and falls a distance 10.3 to the water. You can ignore the weight of the rope.

Societal oppression for the population : Identify how homophobia, heterosexism, and religiosity contribute to societal oppression for this population.

User Account

All Pages