In an economy, real GDP (YYY) grows by 6% over the course of a year, while the velocity of circulation of money (VVV) decreases by 2%. According to the linear approximation of the classical Quantity Theory of Money (Fisher equation of exchange: %ΔM+%ΔV≈%ΔP+%ΔY\% \Delta M + \% \Delta V \approx \% \Delta P + \% \Delta Y%ΔM+%ΔV≈%ΔP+%ΔY), what must be the percentage change in the money supply (MMM) if the central bank wishes to achieve absolute price stability (an inflation rate, %ΔP\% \Delta P%ΔP, of 0%)?
An increase of 8%8\%8%
An increase of 4%4\%4%
A decrease of 8%8\%8%
An increase of 12%12\%12%
