The rate of increase in velocity is 2 percent a year, the money growth rate is...

The rate of increase in velocity is 2 percent a year, the money growth rate is 17 percent a year, and the inflation rate is 12 percent a year.

What is the real GDP growth rate?

The real GDP growth rate is __ percent a year.

Expert Solution

The equation of exchange is

MV=PY

M= money supply growth rate=17%

V= velocity of money growth rate=2%

P= price growth rate=12%

MV=PY

17*2=12*Y

Y=34/12

=2.833%

The real GDP growth rate is 2.833% a year.

Rahul Sunny answered 2 years ago

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