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Suppose the money supply grew at an average annual rate of 8%, velocity was constant, the nominal interest rate averaged 9%, and output grew at an...

 Suppose the money supply grew at an average annual rate of 8%, velocity was constant, the nominal interest rate averaged 9%, and output grew at an average annual rate of 3%. According to the Quantity Theory,

a. inflation averaged 8% per year and the real rate of return was 9%.

b. inflation averaged 11% per year and the real rate of return was 17%.

c. inflation averaged 5% per year and the real rate of return was 4%.

d. inflation averaged 1% per year and the real rate of return was 6%.

***the answer is C, I just don't know how we get there.*****

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c) inflation -... View the full answer

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