In the long run, an increase in the growth rate of the money supply leads to an increase in the real interest rate, but no change in the nominal interest rate.

Question

Quizplus · Accepted Answer

An increase in the growth rate of the money supply typically leads to an increase in the nominal interest rate due to inflation expectations, while the real interest rate adjusts based on the Fisher effect, which separates the impacts of inflation.

In the Long Run, an Increase in the Growth Rate