According to the quantity theory of money, what must the growth rate of the money supply be given the following information? The growth rate of real GDP is 1.0%. The growth rate of nominal GDP is 5.2%. The nominal interest rate is 5.4%. The real interest rate is 1.2%. The money supply (M2) is $11 comma 438 (in billions) According to the quantity theory of money, the growth rate of the money supply must be nothing%. (Round your answer to the nearest tenth.)
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Ответ:
5.2%
Explanation:
Given the following ;
Growth rate of real GDP = 1.0%
Growth rate of nominal GDP = 5.2%
Nominal interest rate = 5.4%
Real interest rate = 1.2%
Money supply (M2) = $11,438 billion
According to the quantity theory of money;
M + V = P + Y
Where,
M = growth rate of money supply
V = growth rate of velocity
P = inflation rate
Y = growth rate of real output or GDP
Where inflation rate is the difference between nominal interest rate and real interest rate
Inflation rate(P) = 5.4% - 1.2% = 4.2%
Growth rate of velocity is assumed to be constant according to the quantity theory of money. Therefore change in growth velocity of money = 0.
Then growth rate in money supply is the sum of inflation growth rate and the growth rate of real gross domestic product.
Now we have,
M = P + Y
M = 4.2% + 1.0% = 5.2%
Ответ:
C. The government can change the reserve
ratio.