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Suppose that in Poland the velocity of money is constant. We have the following macroeconomic data: real GDP, +7%; rate of money growth, +20%; nominal

Suppose that in Poland the velocity of money is constant. We have the following macroeconomic data: real GDP, +7%; rate of money growth, +20%; nominal interest rate, +15%.

1) What is the real interest rate?

2) What is the real interest if the nominal interest rate is 12%? What does this result mean?

3) Suppose real GDP is -2%. What does this mean? What is the real interest now?

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