According to the quantity theory of money, if the money supply grows at 6%, real GDP grows at 2%, and the velocity of money is constant, then the inflation rate will be

Question

Quizplus · Accepted Answer

The quantity theory of money is often expressed by the equation MV = PQ, where M is the money supply, V is the velocity of money (assumed constant in this scenario), P is the price level, and Q is the real GDP. If the money supply grows by 6% and real GDP grows by 2%, with the velocity of money constant, the difference (6% - 2% = 4%) would be reflected in the price level, indicating an inflation rate of 4%.

According to the Quantity Theory of Money, If the Money