Which of the Following Predictions Can Be Made Using the Growth

question 2

Multiple Choice

Which of the following predictions can be made using the growth rates associated with the equation of exchange, given that velocity is stable and that the economy moves to its potential output (Y_P) in the long run?

• A) If %∆M = %∆ Y_P , then %∆P = %∆M.
• B) If %∆M > %∆ Y_P , then %∆P > 0.
• C) If %∆M > %∆ Y_P , then %∆P > %∆M.
• D) If %∆M = %∆ Y_P , then %∆P < 0.

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