In the mid-1990s and through the early 2000s, Japan's annual money supply growth
rate fell to 1-2...

Question

In the mid-1990s and through the early 2000s, Japan's annual money supply growth 
rate fell to 1-2 percent from an average annual rate of 10-11 percent in the 
late 1980s. What effect did this decline have on:
a. Japanese real output?
b. Japanese unemployment?
c. Japanese inflation

David · Accepted Answer

In the mid-1990s and through the early 2000s, Japan's annual money supply growth rate fell to 1-2 percent from an average annual rate of 10-11 percent in the late 1980s. What effect did this decline have on:
a. Japanese real output? 
b. Japanese unemployment? 
c. Japanese inflation
INTRODUCTION
Japan has been the fastest growing economy in the world in the post World War II era, and the first Asian nation to industrialize. This distinction made Japan the second largest economy in the world after the US, a distinction it holds till date despite reeling under a recession for over two decades now. The recession was triggered by a sudden tightening of the monetary policy in the 1990s, with the aim of controlling its financial bubble in real estate and stock markets, by cutting the growth rate of money supply to barely 1-2%.

In the mid-1990s and through the early 2000s, Japan's annual money supply growth rate fell to 1-2 percent from an average annual rate of 10-11 percent in the late 1980s. What effect did this decline...

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