Suppose the Full-Employment Level of Real GDP Is Increasing at a Rate

question 63

Multiple Choice

Suppose the full-employment level of real GDP is increasing at a rate of 3% per period and the money supply is growing at a 3% rate. Using the equation of exchange, what is the value of the long-run inflation rate, assuming constant velocity?

• A) 6%
• B) 3%
• C) 1%
• D) 0%