Inflation - Work It Out: Question 2 Consider an economy with the money demand function is Round answers to two places after the decimal when necessary. d. Suppose the announcement of f new head of the central bank, with a reputation as a tough inflation fighter, reduces expected inflation by 2.5 percentage points. According to the Fisher effect, what is the new nominal interest rate? New nominal interest rate: e. Calculate the new velocity of money. New velocity of money: OCT 16 itv EO