According to the quantity theory of money, 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 _____ percent.

Question

Quizplus · Accepted Answer

The quantity theory of money suggests that a 5% increase in money growth leads to a 5% increase in inflation. The Fisher equation states that a 5% increase in inflation results in a 5% increase in the nominal interest rate.

According to the Quantity Theory of Money, a 5 Percent