Which of the Following Predictions Can Be Made Using the Growth

question 108

Multiple Choice

Which of the following predictions can be made using the growth rates associated with the quantity equation, assuming velocity is stable?

• A) If the money supply grows at a faster rate than real GDP, there will be inflation.
• B) If the money supply grows at a slower rate than real GDP, there will be inflation.
• C) If the money supply grows at the same rate as real GDP, the price level will be fall and there will be deflation.
• D) If the money supply grows at the same rate as real GDP, the price level will also increase at the same rate as real GDP.

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