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Suppose that the velocity of money is stable, 4% real economic growth is occurring, the rate of inflation is 4%, unemployment is 5.3%, and the marginal propensity to save is 3%.
By how much is the money supply growing? Enter your answer as a percentage.

Respuesta :

Answer:

8%

Explanation:

  • Growth in money supply + Growth in velocity = Inflation + Real economic growth

Given:

  • Growth in velocity = 0 (stable at 4% hence 0 growth)
  • Inflation = 4%
  • Real economic growth = 4%

Using formula

  • Growth in money supply + Growth in velocity = Inflation + Real economic growth

  • Growth in money supply + 0 = 4% + 4%
  • Growth in money supply = 8%

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