Answers: Suppose is constant,M is growing 5%per year, Y is growing 2%per year,and r=4. a.First,find =5-2=3. Then,find i=r+=4+3=7. b.Ai 2,same as the increase in the money growth rate. c.If the Fed does nothing,.△π=1. To prevent inflation from rising,Fed must reduce the money growth rate by 1 percentage point per year. Return CHAPTER 7 Money and Inflation slide 31 CHAPTER 7 Money and Inflation slide 31 Answers: a. First, find  = 5 − 2 = 3. Then, find i = r +  = 4 + 3 = 7. b. i = 2, same as the increase in the money growth rate. c. If the Fed does nothing,  = 1. To prevent inflation from rising, Fed must reduce the money growth rate by 1 percentage point per year. Suppose V is constant, M is growing 5% per year, Y is growing 2% per year, and r = 4. Return