Assume we know that over the last 5 years, the velocity of M2 has been decreasing by 1% per year. Meanwhile, inflation has been constant at 2% per year, and real GDP has increased by 4% per year. According to the Quantity Theory of Money, we can conclude that: A. Money supply has grown by about 1% per year. B. Money supply has grown by about 3% per year. C. Money supply has grown by about 5% per year. D. Money supply has grown by about 7% per year. E. None of the above answers are correct.

Assume we know that over the last 5 years, the velocity of M2 has been decreasing by 1% per year. Meanwhile, inflation has been constant at 2% per year, and real GDP has increased by 4% per year. According to the Quantity Theory of Money, we can conclude that: A. Money supply has grown by about 1% per year. B. Money supply has grown by about 3% per year. C. Money supply has grown by about 5% per year. D. Money supply has grown by about 7% per year. E. None of the above answers are correct.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Assume we know that over the last 5 years, the velocity of M2 has been decreasing by 1% per
year. Meanwhile, inflation has been constant at 2% per year, and real GDP has increased by 4%
per year. According to the Quantity Theory of Money, we can conclude that:
A. Money supply has grown by about 1% per year.
B. Money supply has grown by about 3% per year.
C. Money supply has grown by about 5% per year.
D. Money supply has grown by about 7% per year.
E. None of the above answers are correct.

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21
What does the evidence from hyperinflations indicate with respect to the quantity theory of money? a. Evidence shows that money growth and inflation moved together, which supports the quantity theory. b. Evidence shows that money growth and inflation moved together, which does not support the quantity theory. c. Evidence shows that money growth and inflation did not move closely with each other, which supports the quantity theory. d. Evidence shows that money growth and inflation did not move closely with each other, which does not support the quantity theory.