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c) The rate of inflation can be defined as the growth rate of the nominal money supply minus the product of the income elasticity of

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c) The rate of inflation can be defined as the growth rate of the nominal money supply minus the product of the income elasticity of money demand times the growth rate of real output. Assume that the real income elasticity is equal to your answer from part b, that real income is expected by grow by 4.5% over the next year, and that the real interest rate is expected to remain constant over the next year. As noted, before the inflation rate has been zero for several years. The central bank has been pursuing an inflation targeting policy that seeks to maintain a zero-inflation rate next year, then by how much should the central bank increase the money supply? Show your calculations

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