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Given the predictions for nominal wage increases and productivity growth, forecast the inflation and determine equation of exchange.

1. Given the following predictions for nominal wage increases and productivity growth, state your forecast for inflation (assume this is all the information available to make the forecast).

a. Nominal wages will increase 10%. Productivity will rise 6%.3

b. Nominal wages will increase 3%. Productivity will increase 3%.

c. Nominal wages will increase 4%. Productivity will increase 5%.

d. Nominal wages will increase 2%. Productivity will fall 1%.

2. State the equation of exchange. Illustrate what three assumptions convert this equation into the quantity theory of money?

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M922626

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