In the long run, if we ignore changes in velocity, inflation will:
A) be zero.
B) equal the rate of money growth.
C) equal money growth less the growth in potential output.
D) equal money growth plus the growth in potential output.

Question

Quizplus · Accepted Answer

In the long run, inflation is determined by the difference between the rate of money growth and the growth in potential output, assuming velocity is constant. This is based on the quantity theory of money.

In the Long Run, If We Ignore Changes in Velocity