1. You are asked to predict the economic future of a country with the following

Question

1. You are asked to predict the economic future of a country with the following data: The long-run growth rate of potential output is 3% per year, velocity is constant, the money supply grows at a rate of 5% per year. Initially, actual output equals potential output. The nominal interest rate is 3.5%. Prices are sticky in the short run.
The central bank is considering an increase in the money supply growth rate to 7% per year. You are asked to advise them about the economic effects.
a. Determine the country

Explanation / Answer

a) Country

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