If the Quantity of Money Grows at 3 Percent Per

question 253

Multiple Choice

If the quantity of money grows at 3 percent per year, velocity does not grow, and real GDP grows at 2 percent per year, then the inflation rate equals

• A) 6 percent.
• B) 5 percent.
• C) 1 percent.
• D) -1 percent.
• E) 12 percent.

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Definitions:

Tax

Compulsory financial charges or levies imposed by a government on individuals or entities to fund public spending and government operations.

Positive Externality

A benefit that affects a party who did not choose to incur that benefit, commonly seen in situations where the activity of one entity leads to positive effects for others.

Fire Extinguishers

Safety devices used to extinguish or control small fires, often in emergency situations.

External Benefit

A positive effect on a third party or the society at large, generated by the production or consumption of a good or service.