If nominal GDP growth in an economy is a constant 7 percent,the economy's long-run equilibrium is at Y equal to ________ with inflation of ________.
A)100,zero
B)100,7 percent
C)107,zero
D)107,7 percent
E)103.5,3.5 percent

Question

Quizplus · Accepted Answer

In a scenario where nominal GDP growth is a constant 7 percent, the real GDP (Y) would remain constant if the entire growth in nominal GDP is attributed to inflation. Therefore, the economy's long-run equilibrium would be at a constant Y with an inflation rate of 7 percent.

If Nominal GDP Growth in an Economy Is a Constant