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1. It is sometimes suggested that the Federal Reserve should try to achieve zero inflation. Assume that velocity is constant. True or False?
2. In order to achieve this zero-inflation goal, the rate of money growth must equal zero. True or false?

Respuesta :

MrRoyal

Answer:

False

Explanation:

This relates to quantity equation of money.

Let M = Quantity of Money.

V = Velocity

Nominal Value = P * Y

The relationship between the above is: M×V=P×Y .

Where Inflation, P is constant.

The constant velocity, V will reduce the inflation to 0 which will also require that the variables M and Y be proportionally related.

So, the money growth rate must equal the growth rate of real output

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