problem set 28

1.According to Irving Fisher, when velocity and output are fixed, the quantity theory of money implies that inflation equals money growth. What does the quantity theory imply for inflation in the long run in an economy with growing output and fixed or stable velocity?

2.why might the ECB place somewhat greater emphasis on money growth rates than the Federal Reserve when discussing monetary policy?

3.e Level Target vs. Inflation Target Suppose the Consumer Price Index in year 1 is 100 and the actual rate of inflation is 2% in years 2 and 3. Suppose now the economy slips into a recession in year 4 and the rate of inflation falls to 0.5% per year for each year 4, 5 and 6.

4.which of the following factors would increase the portfolio demand for money? Explain.