Suppose that both Friedman and Fisher are absolutely correct. Assume that over many years money supply grows at the rate of 5 percent per year and the rate of growth of real GDP is 3 percent per year. Suppose also that the real interest rate during these years is 2 percent per year. If instead money supply grew at the rate of 7 percent per year, the real interest rate would equal: 1 percent per year 2 percent per year 3 percent per year O 4 percent per year

Suppose that both Friedman and Fisher are absolutely correct. Assume that over many years money supply grows at the rate of 5 percent per year and the rate of growth of real GDP is 3 percent per year. Suppose also that the real interest rate during these years is 2 percent per year. If instead money supply grew at the rate of 7 percent per year, the real interest rate would equal: 1 percent per year 2 percent per year 3 percent per year O 4 percent per year

Economics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506725

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter9: An Introduction To Basic Macroeconomic Markets

Section: Chapter Questions

Problem 9CQ

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