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Lapatulllka [165]
2 years ago
5

If real GDP grows by 3 percent, the velocity of circulation does not change, and the quantity of money grows by 3 percent, then

in the long run the inflation rate is
Business
1 answer:
trapecia [35]2 years ago
7 0

Based on the real GDP growth rate, the velocity of circulation, and the quantity of money, the long run inflation rate will be 0%.

<h3>What is the long-run inflation rate?</h3>

This can be found using the Quantity theory of money:
Money supply x Velocity of circulation = Price level x Real GDP

Can also be written as:

% change in M + % change in V = % change in P + % change in Y

Solving gives:

3% + 0 = P + 3%

P = 3% - 3%

= 0%

The price level is to increase by 0% which means that inflation is 0%.

Find out more on the Quantity theory of money at brainly.com/question/26370040.

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