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Sagot :
The money supply growth is 8%
Solution:
The quantity theory of money states that the general price level of goods and services is
directly proportional to the money supply.
In its normal form, the equation of quantity theory of money is as follows: MV = PY
Here,
M is the money supply,
V is the velocity of money.
P is the general price level, and
Y is the GDP
In its dynamic form, the equation becomes:
Growth in money supply +Growth in velocity = Infltaion+ Real economic growth
It is given that the real economic growth is 4%, and inflation is 4%. The calculation of growth
In money supply is as follows: Growth in money supply +Growth in velocity = Infitaion+ Real economic growth
Growth in money supply +0 = 4%+4% = 8%
The Quantity Theory of Money is a framework for understanding price changes related to the money supply in an economy. He argues that an increase in the money supply causes inflation and vice versa. If the change is negative and large enough.
Learn more about Real economic growth here:- https://brainly.com/question/13942584
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