Why is the theory of inflation that we have learnt in the


1. Why is the theory of inflation that we have learnt in the class called classical theory?

2. Give an example of a transaction whose value does not qualify as a part of nominal GDP. Also give an example where it does.

3. Suppose that the velocity of money is constant. Now, real GDP grows by 5% per year, the money stock grows by 14% per year and the nominal interest rate is 11%. Calculate the real interest rate.

4. Suppose a country has a money demand function (M/P)d= kY, where k is a constant parameter. The money supply grows by 12% per year and the real income grows by 4% per year.

5. Define seigniorage. Suppose Fed prints one thousand $10 bills incurring a cost of $0.5/bill. What is the seigniorage here?

6. Define inflation tax

Request for Solution File

Ask an Expert for Answer!!
Macroeconomics: Why is the theory of inflation that we have learnt in the
Reference No:- TGS01066883

Expected delivery within 24 Hours