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      Question

      If the money supply grows 5 per cent, and real output

      grows 2 per cent, prices should rise by
      A 5 per cent. Correct Answer Incorrect Answer
      B more than 5 per cent Correct Answer Incorrect Answer
      C less than 5 per cent. Correct Answer Incorrect Answer
      D none of these answers Correct Answer Incorrect Answer
      E 2 percent Correct Answer Incorrect Answer

      Solution

      If money supply grows by 5%, real output by 2% then price rises by less than 5%. MV = PY

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