Question 1
The Quantity Explanation for Inflation
According to the quantity equation, if the money supply grows at 10%, the velocity of money grows at 6%, and real output grows at 8%, then the inflation rate will be ________. (Round to the nearest tenth when appropriate.)
◦ 4%
◦ 4.8%
◦ 8%
◦ 7.5%
Question 2
The Quantity Explanation for Inflation
According to the quantity theory of money, if the money supply grows at 5%, real output grows at 7%, and the velocity of money is constant, then the inflation rate will be ________. (Round to the nearest tenth when appropriate.)
◦ 0.7%
◦ -2%
◦ 35%
◦ 12%