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%

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Definitions:

Conformity

The act of matching attitudes, beliefs, and behaviors to group norms or standards.

Stereotypes

Oversimplified and widely held beliefs about the characteristics of particular groups of people.

Prejudicial Emotions

Feelings that are biased or prejudiced, leading to unfair judgments or treatment of others based on preconceived notions rather than individual merit.

Hindsight Bias

The tendency to believe, after an event has occurred, that one would have predicted or expected the outcome, even if it was not predictable.