In the long run,an increase in the growth rate of the money supply causes the inflation rate to ________,which then causes the nominal interest rate to ________.

Question

Quizplus · Accepted Answer

In the long run, an increase in the growth rate of the money supply leads to higher inflation (as per the quantity theory of money). According to the Fisher effect, higher inflation results in an increase in the nominal interest rate.

In the Long Run,an Increase in the Growth Rate of the Money