You are the head of the central bank and you want to maintain 2 percent long-run inflation. Velocity is constant. Real GDP growth is initially 2 percent and money growth is initially 4 percent. GDP growth rises to 3 percent. To meet the inflation target, based on the quantity theory of money, you suggest raising the growth rate of money supply to a) 5 percent interest rate b) 5 percent money supply growth c) 1 percent money supply growth d) 0 percent money supply growth e) 1 percent interest rate

You are the head of the central bank and you want to maintain 2 percent long-run inflation. Velocity is constant. Real GDP growth is initially 2 percent and money growth is initially 4 percent. GDP growth rises to 3 percent. To meet the inflation target, based on the quantity theory of money, you suggest raising the growth rate of money supply to a) 5 percent interest rate b) 5 percent money supply growth c) 1 percent money supply growth d) 0 percent money supply growth e) 1 percent interest rate

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

Chapter16: Monetary Policy

Section: Chapter Questions

Problem 15SQ

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