Suppose Output Is Growing at 3% and the Nominal Money

question 2

Multiple Choice

Suppose output is growing at 3% and the nominal money stock is growing at 0%. Also assume that the economy has reached its medium- run equilibrium. Given this information, we know with certainty that:

• A) inflation is greater than 3%.
• B) inflation is equal to 3%.
• C) deflation occurs.
• D) inflation is positive.
• E) the real interest rate is equal to the nominal interest rate.

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