If the Fed Adheres to a Strict "Money Growth Rule $\vec { M }$

question 17

Multiple Choice

If the Fed adheres to a strict "money growth rule" of 3% (that is,they keep $\vec { M }$ at 3% no matter what) ,what happens if velocity growth ( $\vec { v }$ ) drops?

• A) Inflation,real growth,and nominal wage growth all decrease.
• B) Inflation increases,but real growth and nominal wage growth decrease.
• C) Inflation and nominal wage growth decrease,but real growth increases.
• D) Inflation,real growth,and nominal wage growth all increase.

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Definitions:

Method Of Elimination

A technique for solving systems of equations by removing variables to find a solution that satisfies all equations simultaneously.

Infinitely Many Solutions

A situation where there are limitless solutions that satisfy an equation or system of equations.

Method Of Elimination

A technique for solving systems of equations by eliminating one variable at a time to find the values of the others.

Fractions

Numerical quantities that represent a part of a whole, typically in the form of 'numerator/denominator'.