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:

Facilitated

To facilitate means to make an action or process easier or to assist in the progress of something, often by providing necessary resources, information, or support.

Lafayette's Visit

Refers to the tour of the United States by the Marquis de Lafayette, a French aristocrat and military officer who fought in the American Revolutionary War, celebrated as a hero during his visit in the early 19th century.

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Members of a political group in the early United States advocating for a strong federal government and the ratification of the Constitution.

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The act of being freed from slavery, bondage, or other forms of control or oppression.