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 equals the rate of money growth minus the growth rate of potential output, assuming velocity is constant. This is derived from the quantity theory of money.

In the Long Run, If We Ignore Changes in Velocity