Suppose That an Economy Is Experiencing an Annual Growth of Real

Multiple Choice

Suppose that an economy is experiencing an annual growth of real GDP of 5 percent,and the velocity of money is constant.In order to maintain price level stability what needs to occur?

A) Taxes must be increased by 5 percent,and/or government spending reduced by 5%.
B) A budget deficit of 5% would be required.
C) The money supply must be increased by 5% per year.
D) The money supply must be increased by more than 5% per year.
E) The money supply should be decreased by 5% per year.