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Use the dynamic version of the quantity equation to answer parts (a) through (c). (a) If income is growing at the annual rate of 4% and the money supply is growing at the annual rate of 6%, what must

Use the dynamic version of the quantity equation to answer parts (a) through (c).

  1. (a) If income is growing at the annual rate of 4% and the money supply is growing at the annual rate of 6%, what must be the change in velocity if prices only increase by 1%?

  2. (b) What monetary growth rate is required to maintain price stability (∆P/P = 0) if real income is expected to grow by 5% and velocity is expected to fall by 3%?

  3. (c) If the nominal money supply grows by 8%, prices rise by 6%, and velocity rises by 1%, what must have happened to real income?

Apr 19 2021 View more View Less

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