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Suppose there’s a country where the velocity of money is constant.

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June 7th, 2024

Suppose there’s a country where the velocity of money is constant. Real GDP grows by 6 percent per year, the money stock grows by 10 percent per year, and the nominal interest rate is 7 percent.A) What is the real interest rate?B) What is the equation for real interest rate? How can we interpret this equation?C) What does the real interest rate tell us?

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