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

question 17

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 4% rate. Using the equation of exchange, what is the value of the long-run inflation rate, assuming constant velocity?

• A) 7%
• B) 4%
• C) 1%
• D) -1%

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Definitions:

Compulsions

Actions or thoughts that a person compulsively repeats due to obsessions or strict guidelines.

Obsessions

Recurrent and persistent thoughts, impulses, or images that are intrusive and cause significant anxiety or distress.

Neutralizing

Attempting to eliminate thoughts that one finds unacceptable by thinking or behaving in ways that make up for those thoughts and so put matters right internally.

Cognitive-Behavioral Perspective

A psychological approach that emphasizes the role of thought processes and behaviors in understanding and treating mental disorders.