You Are the Head of the Central Bank and You

Multiple Choice

You are the head of the central bank and you want to maintain 2 percent long-run inflation. Using the quantity theory of money, if real GDP growth is 4 percent and velocity is constant, you suggest a:

A) 4 percent money supply growth
B) 6 percent interest rate
C) 2 percent money supply growth
D) 0 percent money supply growth
E) None of these answers are correct.