According to the quantity theory of money and theFisher effect, if the central bank increases the rateof money growth, thena. inflation and the nominal interest rate bothincrease.b. inflation and the real interest rate both increase.c. the nominal interest rate and the real interestrate both increase.d. inflation, the real interest rate, and the nominalinterest rate all increase.
According to the quantity theory of money and theFisher effect, if the central bank increases the rateof money growth, thena. inflation and the nominal interest rate bothincrease.b. inflation and the real interest rate both increase.c. the nominal interest rate and the real interestrate both increase.d. inflation, the real interest rate, and the nominalinterest rate all increase.
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter22: Money Growth And Inflation
Section: Chapter Questions
Problem 5CQQ
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Question
According to the quantity theory of money and the
Fisher effect, if the central bank increases the rate
of money growth, then
a. inflation and the nominal interest rate both
increase.
b. inflation and the real interest rate both increase.
c. the nominal interest rate and the real interest
rate both increase.
d. inflation, the real interest rate, and the nominal
interest rate all increase.
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