In an Economy in Which Velocity Is Constant and Real

Multiple Choice

In an economy in which velocity is constant and real output grows at an average rate of 3 percent per year, a 5 percent average rate of growth in the money supply would result in a

A) constant price level.
B) low (approximately 2 percent) rate of inflation.
C) decline in the general level of prices at an annual rate of approximately 2 percent.
D) rate of inflation of approximately 8 percent.