In an Economy in Which Velocity Is Constant and Real

question 78

Multiple Choice

In an economy in which velocity is constant and real output grows at an average rate of 3 percent per year, a 5 percent average rate of growth in the money supply would result in a

• A) constant price level.
• B) low (approximately 2 percent) rate of inflation.
• C) decline in the general level of prices at an annual rate of approximately 2 percent.
• D) rate of inflation of approximately 8 percent.

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