If the money supply increases 10 percent, real GDP rises 3 percent, and the price level...

Question

Question

If the money supply increases 10 percent, real GDP rises 3 percent, and the price level...

If the money supply increases 10 percent, real GDP rises 3 percent, and the price level increases 4 percent, then velocity must:

Fall 3 percent (A)

Rise 3 percent (B)

be constant (C)

Rise 7 percent (D)

business economics

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Answer 1

Answer #1

Ans. Rise 3 percent (B)

Explanation
Money supply growth + Velocity = Real GDP + Price level change
Velocity = Money supply growth - Real GDP - Price level change = 10 - 3 - 4 = 3

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Answer 2

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