Suppose the Money Supply Grew at an Average Annual Rate

question 59

Multiple Choice

Suppose the money supply grew at an average annual rate of 8%,velocity was constant,the nominal interest rate averaged 9%,and output grew at an average annual rate of 3%.According to the quantity theory,

• A)inflation averaged 8% per year and the real interest rate was 9%.
• B)inflation averaged 11% per year and the real interest rate was 17%.
• C)inflation averaged 5% per year and the real interest rate was 4%.
• D)inflation averaged 1% per year and the real interest rate was 6%.

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