Assume that demand for money is constant and inelastic (does not depend on nominal interest rates). What should be the growth rate of the money supply to keep inflation at 0%?""

The growth rate of money supply is to be 10% in order to keep inflation at 0%.

Explanation:

As the first part of the question was missing, the complete question is as attached with the solution.

From the given data

Inflation=Increase in prices=0%

Growth Rate=10% (As given in the complete question attached with the solution)

Now as per the Quantity Theory of Money

Money Supply x Velocity of Money Supply= Price x Output

In terms of percentage the formula is given as

%age change in Money Supply +%age change in Velocity of Money Supply= %age change in Price + %age change in Output

Here

M=%age change in Money Supply which is to be calculated

V=%age change in Velocity of Money Supply which is 0 as the velocity is constant

P=%age change in Price which is also termed as inflation and is given as 0%.

O=%age change in Output which is given as 10%

So solving the equation gives

M+V=P+O

M+0=0+10%

So the growth rate of money supply is to be 10% in order to keep inflation at 0%.

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