Question

It is sometimes suggested that the Fed should try to achieve price stability: that is, 0% inflation. If the velocity of money is constant, does zero-inflation mean the money supply should never change?

Answer 1

Money supply should not change

Step-by-step explanation:

Money supply should not change given that when the velocity ( flow ) of money is constant the Inflation is at zero ( 0% )

This is because the increase in supply of money without an appropriate increase in the economy of the country will be lead to inflation. To avoid any chance of inflation the velocity of money should remain constant.