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28 January, 11:05

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

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  1. 28 January, 11:31
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    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
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