If the real GDP increases by 4%, the Price level decreases by 1%, and velocity increases by 6%, then, which is the change in the money supply is _____percent

Question

If the real GDP increases by 4%, the Price level decreases by 1%, and velocity increases by 6%, then, which is the change in the money supply is _____percent
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Solution 1

To answer this question, we need to use the Quantity Theory of Money, which is expressed in the equation MV = PY.

Here, M stands for the money supply, V stands for velocity of money (how quickly money changes hands), P stands for the price level, and Y stands for real GDP.

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