In an Economy in Which Real Output Grows at an Average

question 2

Multiple Choice

In an economy in which real output grows at an average rate of 3 percent per year, a 7 percent average rate of growth in the money supply would result in

• A)an inflation rate of 4 percent, if velocity were constant.
• B)an inflation rate of -4 percent, if velocity were constant.
• C)a $4 increase in the price level per year.
• D)a $4 decrease in the price level per year.

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Definitions:

Computer Companies

Entities that specialize in the development, manufacture, and sale of computer hardware, software, and related services.

Less Regulation

The concept of less regulation involves reducing government rules and oversight to potentially enhance business operations and market freedoms.

Airlines

Companies that provide air transport services for traveling passengers and freight.

Trucking

Refers to the transportation of goods and products by large vehicles over land.