Question

In the medium run, an increase in the rate of growth of nominal money will cause an increase in inflation and an increase in output growth. lower nominal interest rates and no change in the real interest rate. a proportionate increase in inflation. lower nominal and lower real interest rates.

Answer 1

In the medium run, an increase in the rate of growth of nominal money leads to an increase in inflation and output growth. It also results in lower nominal interest rates, but does not change the real interest rate.

Step-by-step explanation:

In the medium run, an increase in the rate of growth of nominal money will cause several effects. It will lead to an increase in inflation, as there is more money circulating in the economy. It will also result in an increase in output growth, as businesses have more funds to invest and expand their operations.

Additionally, an increase in the rate of growth of nominal money will lead to lower nominal interest rates. This is because with more money available, the demand for loans increases, causing lenders to lower their interest rates to attract borrowers.

However, there is generally no change in the real interest rate, which is the interest rate adjusted for inflation. This is because the increase in inflation usually cancels out the decrease in nominal interest rates.

Answer 2

In the medium run, an increase in the rate of growth of nominal money will cause lower nominal and lower real interest rates. Therefore, option (d) is the correct answer.

Step-by-step explanation:

In the medium run, an increase in the rate of growth of nominal money will cause lower nominal and lower real interest rates. This is represented by answer choice (d) in the question. When the money supply increases at a faster rate, it leads to lower interest rates because there is more money available for borrowing. Lower interest rates incentivize borrowing and investment, which can stimulate economic growth.