6. Suppose the velocity of money is constant and potential output

grows by 3% per year. By what percentage should the money

supply grow in order to achieve the following inflation rate

targets?

a. 0%

b. 1%

c. 2%

7. Suppose the velocity of money is constant and potential output

grows by 5% per year. For each of the following money supply

growth rates, what will the inflation rate be?

a. 4%

b. 5%

c. 6%

8. Suppose that a country whose money supply grew by about 20% a year

over the long run had an annual inflation rate of about 20% and that a

country whose money supply grew by about 50% a year had an annual

inflation rate of about 50%. Explain this finding in terms of the equation

of exchange.