In the Long Run, If We Ignore Changes in Velocity

question 33

Multiple Choice

In the long run, if we ignore changes in velocity, inflation will:

• A) be zero.
• B) equal the rate of money growth.
• C) equal money growth less the growth in potential output.
• D) equal money growth plus the growth in potential output.

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Definitions:

Two-factor Model

A Two-factor Model in finance is an asset pricing model that uses two variables to calculate the value of an asset or the expected return.

Commodity Prices

The market prices for raw materials or primary agricultural products.

Market Risk

The risk of losses in investments due to factors that affect the entire market or economy.

Arbitrage Opportunity

A situation in which it is possible to simultaneously buy and sell an asset or commodities in different markets to profit from price differences.