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%
Homework Answers
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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