Suppose the annual growth rate of real GDP for the nation of Svengali is 5% and the growth rate of velocity is 0%.If the money supply growth rate decreases from 4% to 2%,what is the new rate of inflation in Svengali?

Question

Quizplus · Accepted Answer

The correct answer is A because the new rate of inflation in Svengali is -3%. This is because the money supply growth rate has decreased from 4% to 2%, which means that there is less money in circulation. This will lead to a decrease in the price level, which is what inflation is.

Suppose the Annual Growth Rate of Real GDP for the Nation