Macro question

[viradgupta]

If the money supply is growing at 8 percent, the real rate of growth of GDP is 2 percent, and financial innovations are reducing the demand for money by 0.5 percent per year, long-run inflation is

a) 6% or less                

b) more than 6% but not more than 7%

c) more than 7% but not more than 8%          

d) more than 8%

The answer is (b). I think this question relates to qtm equation, but cant figure out how. plz help

Thanks

[viradgupta]

one more ques plz:

Suppose there is a tax increase. Because during the economy's reaction to this the interest rate becomes

a) higher, the decrease in GDP is larger than if the interest rate had not changed

b) higher, the decrease in GDP is smaller than if the interest rate had not changed

c) lower, the decrease in GDP is larger than if the interest rate had not changed

d) lower, the decrease in GDP is smaller than if the interest rate had not changed