Under a constant growth rate of money rule of 5 percent in an economy in which Real GDP grows at an average rate of 5 percent and velocity is constant,the inflation rate is

Question

Quizplus · Accepted Answer

Under the quantity theory of money, if the money supply grows at the same rate as real GDP and velocity is constant, the inflation rate will be zero because the increase in money supply is exactly offset by the increase in real GDP.

Under a Constant Growth Rate of Money Rule of 5