In an economy in which velocity of money in circulation is constant and real output grows at an average rate of 3 percent per year,a 5 percent average rate of growth in the money supply would result in a:

A) constant price level.
B) slowly increasing price level.
C) slowly decreasing price level.
D) stable 4 percent growth in real GDP.
E) stable 4 percent growth in nominal GDP.

Velocity of Money

The velocity at which currency is transferred from one deal to another and the extent to which a currency unit is employed over a certain period.

Real Output

The actual value of goods and services produced in an economy, adjusted for inflation, representing the total economic output.

Money Supply

The aggregate financial resources available for transactions in an economy at a specific point, counting in cash forms like coins, notes, and the values in checking and savings bank accounts.