Money and Economic Volatility - 24rs - short Answers

1. We generally expect the rate of inflation to be reflected in interest rates. With this in mind discuss the difference between the effects of anticipated and unanticipated inflation on the rate of interest and also make sure that you discuss the wealth distribution implications these.

2. The so-called quantity theory of money suggests that the amount of money in circulation is the primary determinant of the price level in the economy and that the growth rate of the money supply is the primary determinant of the inflation rate. This idea is based on a series of implicit arguments. Please identify what these are and also evaluate the logic of the arguments that the quantity theory is based on.