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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

    Solution

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

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