The velocity of circulation grows at 1 percent and real GDP grows at 3 percent. if the quantity of money grows at 4 percent, the inflation rate is
A)zero.
B)10 percent.
C)4 percent.
D)2 percent.
E)8 percent.

Question

Quizplus · Accepted Answer

The inflation rate can be calculated using the equation: Inflation rate = Money supply growth + Velocity growth - Real GDP growth. Substituting the given values: 4% + 1% - 3% = 2%.

The Velocity of Circulation Grows at 1 Percent and Real