# Money supply, inflation, Quantity Equation, Fisher effect

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Based on quantity theory of exchange (with income velocity V constant) and the Fisher Effect...assuming Yf (full employment) growth rate for real GDP is 3.5% and the real SHORT TERM interest rate (r) is a constant 1% what would be the effect on GDP inflation, GDP growth and Nominal LT Interest rates?

Please see attached chart.

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#### Solution Summary

The solution calculates inflation, real GDP growth rate, and SHORT TERM nominal interest rates, given Yf (full employment) growth rate for the real GDP and the real SHORT TERM interest rate, based on quantity equation of exchange (with income velocity V constant) and the Fisher effect.

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