Suppose That We Produce a Graph with the Annual Inflation

Multiple Choice

Suppose that we produce a graph with the annual inflation rate on the y-axis and the growth rate of the money supply minus the growth rate of real GDP on the x-axis.We plot the averages of each of these quantities over the past 50 years on the graph.If the quantity theory of money is approximately correct,then ________.

A) each country's point will lie approximately on a horizontal line
B) each country's point will lie approximately on a vertical line
C) each country's point will lie approximately on some upward-sloping line
D) each country's point will lie approximately on the 45° line