The quantity equation tells us that, in the long run, when the economy is at potential GDP, an increase in the growth of the money supply will.

The quantity equation tells us that, in the long run, when the economy is at potential GDP, an increase in the growth of the money supply will…

• always increase inflation by the same amount if velocity is constant.
• increase inflation by a smaller amount if velocity increases.
• increase inflation by a larger amount if velocity decreases.
• always increase inflation.