If the nominal money supply grows by 5%, real income falls by 2%, and the income elasticity of money demand is 0.8, then the inflation rate is
A. 3.0%.
B. 3.4%.
C. 6.6%.
D. 7.0%.
Answer:C
If the nominal money supply grows by 5%, real income falls by 2%, and the income elasticity of money demand is 0.8, then the inflation rate is
A. 3.0%. B. 3.4%. C. 6.6%. D. 7.0%.