Suppose That Velocity and Output Are Constant, the Quantity Theory

question 30

Multiple Choice

Suppose that velocity and output are constant, the quantity theory and Fisher effect are correct, the nominal interest rate is 7 percent, and money growth is 2 percent. Which of the following is consistent with these facts?

• A)The real interest rate is 2 percent, and nominal wages are rising.
• B)The real interest rate is 2 percent, and real wages are rising.
• C)The real interest rate is 5 percent, and nominal wages are rising.
• D)The real interest rate is 9 percent, and real wages are rising.

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