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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 exchange.rate?
Suppose the Bank of Canada announces that it will raise the money supply in the future but does not change the money supply today. Using the Fisher equation, explain what happens t
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