If real GDP and the velocity of circulation do not change and the quantity of money grows by 3 percent, then in the long the inflation rate is
A) 3 percent.
B) 0 percent.
C) -3 percent.
D) larger than than 3 percent.
E) More information is needed to answer the question.

Question

Quizplus · Accepted Answer

According to the quantity theory of money, if real GDP and the velocity of circulation are constant, the inflation rate will equal the growth rate of the money supply, which is 3 percent in this case.

If Real GDP and the Velocity of Circulation Do Not