The rules-based monetary policy reads: The annual growth rate in the money supply will be equal to the average annual growth rate in Real GDP minus the growth rate in velocity. If the average growth rate in Real GDP this year is 3 percent and the growth rate in velocity is 2 percent, then the money supply will increase by percent this year.

the increase in the money supply is 1%

Explanation:

The computation of the increase in the money supply is given below;

The increase in the money supply is

= Growth rate in Real GDP - Growth rate in velocity

= 3% - 2%

= 1%

Hence, the increase in the money supply is 1%

It would be come by subtracting the two items from each other so that the accurate percentage could come

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