Long-run rate of inflation according to the quantity theory

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Reference no: EM13801650

Suppose velocity is constant, the growth rate of real GDP is 3% per year, and the growth rate of money is 5% per year.

a) Calculate the long-run rate of inflation according to the quantity theory of money.

b) Suppose the growth rate of money rises to 10% per year. Now what is the long-run growth rate?

c) From the original case, suppose real GDP growth falls 2% per year. What is the new long-run growth rate of inflation?

Reference no: EM13801650

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