Suppose That Velocity and Output Are Constant and That the Quantity

Multiple Choice

Suppose that velocity and output are constant and that the quantity theory and Fisher effect are both correct. If the nominal interest rate is 4 percent and inflation is 2 percent, what is the money supply growth rate or the real interest rate?

A) The money supply growth rate is 2 percent.
B) The real interest rate is 6 percent.
C) The real interest rate is 4 percent.
D) The money supply growth rate is 6 percent.