Using the equation of exchange, if inflation is 1.5%, real output grows by 3.0%, and the growth rate of money is 5.0%, the change in the velocity of money is?:

Question

985 viewsDecember 14, 2016

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Darshita 6.14K December 14, 2016 0 Comments

.Using the equation of exchange, if inflation is 1.5%, real output grows by 3.0%, and the growth rate of money is 5.0%, the change in the velocity of money is?: highlight your answer

A.Zero; velocity is constant.

B.-0.5%.

C.+4.5%.

D.+0.5%.

1 Answer

score 0 · Answer 1 · 2016-12-14T12:08:59+00:00

B.-0.5%.

Working notes for the above answer is as underNow we put the figures in to the formulla

V = 1.015*1.03 / 1.05

=0.99566

Now

1 – 0.99566

=- 0.005

or -0.5%

1 Answer

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