In a hypothetical economy, the annual velocity of money is 10,and level of real output is $800 billion. In year 1, the economy'smoney supply is $100 billion and in year 2 it is $112 billion.Calculate the rate of inflation between years 1 and 2 in each ofthe following case:
a) The velocity of money and the economy's real output stayconstant.
b) The velocity of money in year 2 rises to 12 andthe level of real output stays constant.
c) The volocity of money stays constant at 10, and the levelof real output rises 3 percent.