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Suppose you are the Governor of the Bank of England. You want to apply the quantity theory of money to achieve a long-run inflation rate of 3% per year. If velocity is increasing by 19% per year, and real GDP grows a an annual rate of 2%, which of the following policies would you recommend? Select one: O a. Money supply growth of 4% per year. O b. Money supply growth of 6% per year. O C. A nominal interest rate of 5% per year. O d. A nominal interest rate of 3% per year.

Suppose you are the Governor of the Bank of England. You want to apply the quantity theory of money to achieve a long-run inflation rate of 3% per year. If velocity is increasing by 19% per year, and real GDP grows a an annual rate of 2%, which of the following policies would you recommend? Select one: O a. Money supply growth of 4% per year. O b. Money supply growth of 6% per year. O C. A nominal interest rate of 5% per year. O d. A nominal interest rate of 3% per year.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Suppose you are the Governor of the Bank of England. You want to apply the quantity theory of money to achieve a long-run inflation rate of 3% per year. If velocity is increasing by 1% per year, and real GDP grows at an annual rate of 2%, which of the following policies would you recommend? Select one: O a. Money supply growth of 4% per year. O b. Money supply growth of 6% per year. O c. A nominal interest rate of 5% per year. o d. A nominal interest rate of 3% per year.
Transcribed Image Text:Suppose you are the Governor of the Bank of England. You want to apply the quantity theory of money to achieve a long-run inflation rate of 3% per year. If velocity is increasing by 1% per year, and real GDP grows at an annual rate of 2%, which of the following policies would you recommend? Select one: O a. Money supply growth of 4% per year. O b. Money supply growth of 6% per year. O c. A nominal interest rate of 5% per year. o d. A nominal interest rate of 3% per year.
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