Refer to the above graph. A decrease in supply would best be reflected by a change from:

If the Fed wants to lower the U.S. exchange rate, what action should it take in the foreign exchange market? Why does the action lower the exchange rate?

What will be an ideal response?

Suppose the velocity of money is not fixed, but stable at about 4% growth per year

How could the quantity theory of money be modified to include a stable growth rate of the velocity of money? In this modified version with velocity growing at about 4% per year, what would the growth rate of the other variables need to be to cause inflation?