If during 2011 the money supply increases by 3%, the inflation rate is 2%, and the...

Question

Question

If during 2011 the money supply increases by 3%, the inflation rate is 2%, and the growth of real GDP is 3%, what must have h

Answer 1

Answer #1

To calculate the change in velocity we will use the following equation:

percent change in money supply + percent change in velocity = percent change in real GDP + percent change in inflation rate

So, Percent change in velocity = 3 + 2 - 3 = 2%

So, during 2011, the value of velocity increases by 2%

Answer 2

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