Federal reserve increases the growth rate of money supply

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Assume that wages and prices are sticky and that we start at a long-run equilibrium. Assume that at this initial point, the growth rate of the money supply is 5%, the growth rate of the velocity of money is 4% and that the real economic growth rate is 3%. Now assume that the Federal Reserve has decided to increase the growth rate of the money supply by 6% and that the Federal Reserve leaves the growth rate of the money supply at this elevated rate.

After the Federal Reserve increases the growth rate of the money supply, what is the growth rate of the velocity of money? Hint: enter your answer with a % sign

Reference no: EM131173417

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