Look at Figure 18.7. Between 1960 and 1980, the velocity of money increased at an annual average rate of 4.3 percent. Suppose in 1980, you also knew that real GDP increased at an annual average rate of 5 percent over the past 20 years.

Using that information:

a) If your desired rate of inflation for the next few years was 5 percent, what would you suggest money growth should be?

b) Between 1980 and 1985, the velocity of money drops from 7 to