Answer to Question #114280 in Macroeconomics for Jaheed

Question

If you were following into current year:

the budget deficit is 3% of the GDP.

the real economic growth is 6%

unemployment rate is 3,5%.

supply of money is growing at constant rate of 3,5% per year.

demand for money is constant

price of oil increased by 9%

the deficit of the balance of trade is 7% of the GDP

Based on the quantity theory of money the inflation rate is ____%?

Answer 1

If the real economic growth is 6%, and supply of money is growing at constant rate of 3,5% per year, then based on the quantity theory of money the inflation rate is $3.5 - 6 = -2.5$ %.