Using the equation of exchange, if real output increases by 5 percent per year and velocity is stable, in order to keep the price level stable
A. The interest rate must increase by 5 percent per year.
B. The money supply must increase by more than 5 percent per year because nominal output is greater than 5 percent.
C. The money supply must increase by 5 percent per year.
D. Velocity must increase by 5 percent per year.
Answer: C
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