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Consider an economy in a steady-state with growing money supply, growing output and a constant real interest rate. Money supply grows at a constant rate
Consider an economy in a steady-state with growing money supply, growing output and a constant real interest rate. Money supply grows at a constant rate = 0.05, such that Ms t+1 = (1 + )Ms t . Output grows at a constant rate g = 0.02, such that yt+1 = (1 + g)yt
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