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Q. Nominal interest rate and expected inflation?
When we have inflation, we can't, of course, presume that expected inflation is zero. So real interest rate will no longer be equal to nominal interest rate and we should use R = r + pe. Expected inflation pe is exogenous (even though not essentially constant. In more advanced Keynesian models you would find numerous assumptions on how expectations are formed.
what is Y = C(Y,T) + G + I(r)
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what is the meaning of the statement ''money is not merely a veil or wrapper''?
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