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Author Question: If the growth rate of the quantity of money is 4 percent per year, potential GDP and real GDP grow ... (Read 86 times)

littleanan

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on: Jun 29, 2018
If the growth rate of the quantity of money is 4 percent per year, potential GDP and real GDP grow at 3 percent per year, and velocity does not change, in the long run what is the inflation rate?
 
  What will be an ideal response?

Question 2

Under a flexible exchange rate system, exchange rates are determined by free markets.
 
  Indicate whether the statement is true or false


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honnalora

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Reply #1 on: Jun 29, 2018
Answer to Question 1

With velocity constant, in the long run, the inflation rate equals the growth in the quantity of money minus the growth in potential GDP, or (4 percent) - (3 percent) = 1 percent.

Answer to Question 2

TRUE


littleanan

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Reply #2 on: Jun 29, 2018
Correct answers!


honnalora

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Reply #3 on: Jun 29, 2018
Great! Please up vote :D


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