Posted by **greg** on Sunday, October 21, 2007 at 5:34pm.

1. In the Country of Wiknam, the velocity of money is constant. Real GDP grows by 5 percent per year, the money stock grows by 14 percent per year, and the nominal interest rate is 11 percent. What is the real interest rate?

2. The goverment raises taxes by $100 billion. If the marginal propensity to consume is 0.6, what happens to the following? Do they rise or fall? By what amounts?

a. Public saving

b. Private saving

c. National saving

d. Investment

- ECON-HELP!! -
**K**, Monday, March 30, 2015 at 3:24pm
% Change in M + % Change in V = % Change in P + % Change in Y.

i.e, % Change in P = % Change in M + % Change in V – % Change in Y.

% Change in P = 14% + 0% – 5% = 9%.

% Change in P is the inflation rate π. From the Fisher equation, we have

i = r + π,

i is the nominal interest rate and r is the real interest rate. i is given as 11% in the problem, and we just calculated above that π is 9%. Hence, r is 2%

## Answer This Question

## Related Questions

- ECON--HELP!?!?! - 1. In the Country of Wiknam, the velocity of money is constant...
- ECON - CAN ANYONE PLEASE HELP// 1. In the Country of Wiknam, the velocity of ...
- econ-HELP! - CAN ANYONE PLEASE HELP// 1. In the Country of Wiknam, the velocity...
- ECON-can anyone help - CAN ANYONE PLEASE HELP// 1. In the Country of Wiknam, the...
- ECON--HELP!!! - I am at work and am sending this on my cell phone.. BEFORE MY ...
- Economics - If the velocity of circulation is constant, real GDP is growing at 3...
- Macroeconomics - The money supply in Freedonia is $200 billion. Nominal GDP is $...
- Macroeconomics - suppose that this year's money supply is $500b, nominal gdp is...
- Economic - All of the following refer to the Economy of Ecoland: - GDP in 1990 ...
- Econ - The nominal interest rate is 12 percent per year in Canada and 8 percent ...

More Related Questions