What is the short-run and long-run effect on the nominal interest rate from an increase in the growth rate of the quantity of money?
What will be an ideal response?
In the short run, the increase in the growth rate of the quantity of money lowers the nominal interest rate. However in the long run the increase in the growth rate of the quantity of money creates higher inflation and the higher inflation leads to a rise in the nominal interest rate.
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Which of the following developments will most likely lead to an increase in the velocity of money?
a. a decrease in the expected inflation rate b. an increase in money interest rates c. a sharp decline in using credit cards d. a decrease in real income
A competitive price-searcher market is characterized by firms
a. being able to choose their price and by low barriers preventing firms from entering or leaving the market. b. being able to choose their price and by high barriers preventing firms from entering or leaving the market. c. having to accept the market price for their product and by high barriers preventing firms from entering or leaving the market. d. having to accept the market price for their product and by low barriers preventing firms from entering or leaving the market.