How fast did the money supply grow at this point, before Volcker started fighting inflation? 10% 7% 3% None of the answers is correct.

ENGR.ECONOMIC ANALYSIS
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ISBN:9780190931919
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Chapter1: Making Economics Decisions
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Let's reenact a simplified version of the 1981–1982 Volcker disinflation. Expected inflation and actual inflation are both 10%, real growth is 3%, and to keep it simple assume that velocity growth is zero. Thus, we have AD: Money growth = inflation + real growth. Now let's define a simple SRAS curve: Inflation = expected inflation + 1 × (real growth rate – Solow growth rate). How fast did the money supply grow at this point, before Volcker started fighting inflation?

 

10%

 

7%

 

3%

 

None of the answers is correct.

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