If the real GDP growth is 4 percent per year, the money growth rate is 6 percent, and velocity is constant, using the quantity theory, the inflation rate is:

Name: If the real GDP growth is 4 percent per year, the money growth rate is 6 percent, and velocity is constant, using the quantity theory, the inflation rate is:
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Question

Quizplus · Accepted Answer

According to the quantity theory of money, if velocity is constant, the inflation rate is the money growth rate minus the real GDP growth rate. Therefore, 6% - 4% = 2%.

If the Real GDP Growth Is 4 Percent Per Year