Question

Suppose that there is a financial crisis, and people choose to spend less. As a result, velocity drops by 5 percent. According to market monetarists, if the GDP target growth rate is 3 percent, the Fed would need to increase the money supply by ______________ percent in order to achieve their GDP target.

Answer 1

Eight(8) percent

Step-by-step explanation:

Base on the scenario been described in the question, the fed will need to the supply of money by eight (8) percent in to achieve their target.