The growth rate of real GDP in Astoria is 7.5%.Assume the growth rate of velocity is 0%.If Astoria wishes to decrease the inflation rate from the annual rate of 5.99% to a target rate of 4.5% and maintain its current growth rate of real GDP,by how many percentage points will the growth rate of the money supply need to change?

Question

Quizplus · Accepted Answer

To decrease the inflation rate by 1.49 percentage points (from 5.99% to 4.5%) while maintaining the same real GDP growth rate, the money supply growth rate must decrease by the same amount, 1.49 percentage points, according to the quantity theory of money.

The Growth Rate of Real GDP in Astoria Is 7