According to the quantity theory a 5 percent increase in money growth increases inflation by ___ percent. According to the Fisher equation a 5 percent increase in the rate of inflation increases the nominal interest rate by _____.
A) 1; 5
B) 5; 1
C) 1; 1
D) 5; 5

Question

Quizplus · Accepted Answer

According to the quantity theory of money, a 5 percent increase in money growth increases inflation by the same amount, 5 percent. According to the Fisher equation, a 5 percent increase in the rate of inflation increases the nominal interest rate by the same amount, 5 percent.

According to the Quantity Theory a 5 Percent Increase in Money