If the economy of the nation of Fingle-Fargle is growing at 6% per year, its money...

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If the economy of the nation of Fingle-Fargle is growing at 6% per year, its money...

If the economy of the nation of Fingle-Fargle is growing at 6% per year, its money supply grows at 10% per year, and its velocity growth is stable, then Fingle-Fargle's inflation rate is... Group of answer choices

4%

6%

16%

60%

business economics

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Answer 1

Answer #1

As per the quantity theory of money,

Change in Ms + Change in Velocity = Change in Price + Change in output

Substitute the given values as below:

10 + 0 = change in P + 6

Change in P = 4%

Thus, inflation rate is 4%

Correct option: 4%

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Answer 2

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