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If the Fed Adheres to a Strict "Money Growth Rule M\vec { M }

Question 4

Multiple Choice

If the Fed adheres to a strict "money growth rule" of 3% (that is, they keep M\vec { M } at 3% no matter what) , what happens if velocity growth ( v\vec { v }
) drops?


A) Inflation, real growth, and nominal wage growth all decrease.
B) Inflation increases, but real growth and nominal wage growth decrease.
C) Inflation and nominal wage growth decrease, but real growth increases.
D) Inflation, real growth, and nominal wage growth all increase.

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