Question

Look at Armenia. The money supply growth rate and the average rate of inflation are 120%. If the growth rate in real GDP was 80%, the percent change in velocity would be

Answer 1

Answer:

80%

Explanation:

As per the Quantity Theory of Money,

Inflation rate + growth rate of real GDP = Money supply growth rate + Growth rate of velocity

So, The percentage change in velocity is

= Average rate of inflation + growth rate in real GDP - money supply growth rate

= 120% + 80% - 120%

= 80%

As the Growth rate of velocity  equals to the percentage change in velocity