Fisher's equation and crowding out effect
1- In the country of Wiknam, the velocity of money is constant. Real GDP grows by 5 percent per year, the money stock grows by 14 percent per year, and the nominal interest rate is 11 percent. Illustrate what is the real interest rate?
2- Briefly explain the meaning of "the full-crowding out" and "the neutrality of money" in the Classical model. Illustrate what do they imply about the effectiveness of government policies to improve the economic performance of a country?