How would I find the rate the Fed should let the money supply grow in order to completely stop inflation, if the velocity of money is increasing by 3% and the economy is growing at a rate of 2.5% a year.
Whats the difference between the statement "the money supply is fixed" and the statement "the money supply is exogenous"?© BrainMass Inc. brainmass.com March 4, 2021, 8:23 pm ad1c9bdddf
The key equation of the Quantity theory of money is PY = MV, where P is the price level, Y. is the real GDP, M is the money supply and V is the velocity. This equation can be represented as (percent change in the money supply) + (percent change in velocity) ...
The following problem helps with a problem involving velocity, inflation and money supply.