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Macroeconomics

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Percent Changes with Quantity Theory of Money: Flexible Prices

MACRO-RQYMSV

Suppose that prices are perfectly flexible in the short run. If the money supply rises by $10\%$, the velocity of money rises by $2\%$, and non-monetary forces drive output to fall by $5\%$ by what percent will prices rise?

A

$2\%$

B

$7\%$

C

$8\%$

D

$10\%$

E

$12\%$

F

$17\%$

G

None of the above.