Question

(c) Use the following information (in rupees):
Income (Y) = 1,00,000
Nominal Money Supply (M) = 80,000
Price Level (P) = 20
Calculate the money growth rate required to
finance the budget deficit of Rs.10,000 in an
economy. 4

Answer 1

$Y=100,000$

$Money Supply( M)=80,000$

$Price Level (P)=20$

Money Growth Rate = $\frac {P\times Y}{M}$

$=\frac{20\times100,000}{80,000}$

$=25$ %