Suppose the Velocity of Money Is Not Fixed,but Stable at About

question 58

Essay

Suppose the velocity of money is not fixed,but stable at about two percent growth per year.How could the quantity theory of money be modified to include a stable growth rate of the velocity of money? In this modified quantity theory of money with velocity growing at two percent per year,what would the growth rate of the other variables in the theory need to be to cause inflation?

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Definitions:

Zero Growth Stock

A stock from a company which is expected to see no growth in dividends or earnings, typically offering high initial dividend yields.

Annual Dividend

The total amount of dividends that a company pays out to its shareholders over a single fiscal year.

Required Rate of Return

The minimum return that investors expect to earn from their investment in a particular asset, considering the risk associated with it.

Dividend

A dividend is a payment made by a corporation to its shareholders, usually as a distribution of profits.