If nominal money supply grows 3% and real money demand grows 8%,the inflation rate is

Name: If nominal money supply grows 3% and real money demand grows 8%,the inflation rate is
Brand: Quizplus
Rating: 4.8 (56 reviews)

Question

Quizplus · Accepted Answer

The quantity theory of money states that the inflation rate is equal to the growth rate of the nominal money supply minus the growth rate of real money demand. Therefore, the inflation rate in this case is:
Inflation rate = 3% - 8% = -5%
A negative inflation rate means that there is deflation.

If Nominal Money Supply Grows 3% and Real Money Demand