Assume that money velocity is constant over time (vt = v for all t). Suppose that the money supply grows at 5% (0.05) while real GDP grows at 3% (0.03). ACcording to the quantitative theory of money, what should the inflation rate be? Round up to the second decimal point.

Assume that money velocity is constant over time (vt = v for all t). Suppose that the money supply grows at 5% (0.05) while real GDP grows at 3% (0.03). ACcording to the quantitative theory of money, what should the inflation rate be? Round up to the second decimal point.

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

Chapter16: Monetary Policy

Section: Chapter Questions

Problem 15SQ

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Question

Assume that money velocity is constant over time (v
= v for all t). Suppose that the money
supply grows at 5% (0.05) while real GDP grows at 3% (0.03). According to the quantitative
theory of money, what should the inflation rate be? Round up to the second decimal point.

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