The Brazilian economy is growing at a 6% annual rate in real terms. The Bank of Brazil is expanding its monetary base (e. g., money M1) at a rate of 30% per year. The Brazilian government bonds yield 26%. What prediction would a monetary economist make for the inflation rate if she believes in quantity theory of money and assumes that the velocity of money is stable

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answer: in the short-run firms will respond by raising the price of turkey.

explanation: initially the long-run equilibrium is at a price of $5 per pound of turkey and a quantity of 50 million pounds per year. now, when webmd claims that a protein found in turkey will increase your expected lifespan by 4 years. the consumers demand for turkey will increase at every price shifting the demand curve to the right from d1 to d2. while, there will be no change in the supply curve in the short-run as it is not possible for producers to adjust supply so quickly. as a result the new equilibrium will occur at a higher price and a higher quantity of turkey.

thus, in the short run firms will respond by increasing the price of turkey, selling more quantity at a higher price and earning economic profits.