If velocity does not change and the quantity of money grows at the same rate as does real GDP, then in the long run
A) the inflation rate equals the growth rate of the quantity of money.
B) the nominal interest rate is less than the real interest rate.
C) the real interest rate is less than the nominal interest rate.
D) the inflation rate equals zero.
E) the nominal interest rate equals zero.

Question

Quizplus · Accepted Answer

If the quantity of money grows at the same rate as real GDP and velocity is constant, the price level remains stable, resulting in zero inflation.

If Velocity Does Not Change and the Quantity of Money