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4 [20 marks) 5.1) Suppose the central bank of a country increases the growth rate of the money supply from 5 percent per year to

4 [20 marks) 5.1) Suppose the central bank of a country increases the growth rate of the money supply from 5 percent per year to 50 percent per year. What happens to prices? What happens to nominal interest rates? Why might the central bank be doing this? (10 marks) 5.2) What are the costs of ination? Which of these costs do you think are the most important for the Thai economy? (10 marks)

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