If the average price level increases 10 percent per year, and the velocity of money is 2, then the inflation rate is:
A) 10 percent.
B) 5 percent.
C) 2 percent.
D) 20 percent.

Question

Quizplus · Accepted Answer

The inflation rate is directly reflected by the average price level increase, which is 10 percent per year in this scenario. The velocity of money does not directly affect the inflation rate calculation in this context.

If the Average Price Level Increases 10 Percent Per Year