Consider Two Countries, Hitech and Lotech

question 12

Essay

Consider two countries, Hitech and Lotech. In Hitech new arrangements for making payments, such as credit cards and ATMs, have been enthusiastically adopted by the population, thereby reducing the proportion of income that is held as real money balances. Over this period no such changes occurred in Lotech. If the rate of money growth and the growth rate of real GDP were the same in Hitech and Lotech over this period, then how would the rate of inflation differ between the two countries? Carefully explain your Answer .

---

Definitions:

Ampere-Turns

A unit of magnetomotive force in an electromagnetic coil, calculated by multiplying the current (in amperes) by the number of turns in the coil.

Current Path

The path or route that electric current follows through a circuit or an electrical device.

Series-Parallel

A configuration in electrical circuits where components are arranged in a combination of series and parallel connections to manage voltage and current distribution.