The table below shows data for Brazil. $$\begin{array} { | l | c | c | }
\hline & \mathbf { 2 0 0 6 } & \mathbf { 2 0 0 7 } \
\hline \text { Real GDP growth rate } & 3.8 & 5.4 \
\hline \text { Inflation rate } & 4.2 & 3.7 \
\hline
\end{array}$$
Assuming the rate of velocity change is constant,

Question

The table below shows data for Brazil. $$\begin{array} { | l | c | c | } 
\hline & \mathbf { 2 0 0 6 } & \mathbf { 2 0 0 7 } \
\hline \text { Real GDP growth rate } & 3.8 & 5.4 \
\hline \text { Inflation rate } & 4.2 & 3.7 \
\hline
\end{array}$$
Assuming the rate of velocity change is constant,

Quizplus · Accepted Answer

According to the quantity theory of money, MV=PY. Assuming the rate of velocity change is constant, we can conclude that the growth rate of money (M) is equal to the growth rate of nominal GDP (PY). Therefore, if real GDP growth rate (Y) increased from 3.8% to 5.4%, and inflation rate (P) decreased from 4.2% to 3.7%, then the growth rate of nominal GDP (PY) increased from 8.16% to 9.93%. Thus, the growth rate of money (M) must have also increased from 8.16% to 9.93%, indicating that choice A is correct. The other choices are incorrect because we cannot infer them from the given data.

The Table Below Shows Data for Brazil Assuming the Rate of Velocity Change Is Constant, A) the l

The Table Below Shows Data for Brazil Assuming the Rate of Velocity Change Is Constant,
A) the l