The nominal interest rate is currently 7% per year and the current expected inflation is 1%. Suppose the Fed unexpectedly increases the growth rate of the money supply, causing the inflation rate to rise unexpectedly from 1% to 3% per year. As a result of this change in inflation, the nominal interest rate will now be 9 %. Assume that the classical dichotomy holds.

The nominal interest rate is currently 7% per year and the current expected inflation is 1%. Suppose the Fed unexpectedly increases the growth rate of the money supply, causing the inflation rate to rise unexpectedly from 1% to 3% per year. As a result of this change in inflation, the nominal interest rate will now be 9 %. Assume that the classical dichotomy holds.


The nominal interest rate is currently 7% per year and the current expected inflation is 1%.  Suppose the Fed unexpectedly increases the growth rate of the money supply, causing the inflation rate to rise unexpectedly from 1% to 3% per year.  As a result of this change in inflation, the nominal interest rate will now be  9 %.  Assume that the classical dichotomy holds.


[Round your answer to the nearest whole number.  No decimals in your answer]


Answer Key: 9