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Suppose that Canada has a money demand function M = SPY (i.e. L(Y, i) = Y), where & is a constant. Real income Y grows
Suppose that Canada has a money demand function M = SPY (i.e. L(Y, i) = Y), where & is a constant. Real income Y grows at a rate of 25% per year, while money supply M$ grows at a rate of 5%. 1) What is Canada's inflation rate? 2) What happens to Canada's inflation rate if & is rising at a rate of 33%/year? What sort of economic event could cause & to fall
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