Suppose a Constant-Money-Growth-Rate Rule of 3 Percent Is Being Considered

question 32

Multiple Choice

Suppose a constant-money-growth-rate rule of 3 percent is being considered.If it is estimated that average annual Real GDP growth is 3.5 percent and it turns out that velocity is rising by 2 percent a year on average,the rule would produce an average annual rate of inflation of __________ percent.

• A) 1.5
• B) 2.5
• C) 3.0
• D) 5.5
• E) 2.0