You are the head of the central bank and you want to maintain 0 percent long-run inflation. You use the quantity theory of money. Suppose long-run real GDP growth falls from 3 percent to 2 percent. Velocity is constant and initially inflation is 0. The quantity theory suggests you should: a) raise velocity b) choose a 0 percent money supply growth c) lower the growth of money supply to 2 percent d) raise the growth rate of money supply to 2 percent.
You are the head of the central bank and you want to maintain 0 percent long-run inflation. You use the quantity theory of money. Suppose long-run real GDP growth falls from 3 percent to 2 percent. Velocity is constant and initially inflation is 0. The quantity theory suggests you should: a) raise velocity b) choose a 0 percent money supply growth c) lower the growth of money supply to 2 percent d) raise the growth rate of money supply to 2 percent.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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You are the head of the central bank and you want to maintain 0 percent long-run inflation. You use the quantity theory of money. Suppose long-run real
a) raise velocity
b) choose a 0 percent money supply growth
c) lower the growth of money supply to 2 percent
d) raise the growth rate of money supply to 2 percent.
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