Final answer:
The rate at which the money supply must grow for the central bank to achieve a long-run target inflation rate of π depends on various factors. A steady growth in the money supply of 3% per year is suggested by some economists as an appropriate approach.
Step-by-step explanation:
The rate at which the money supply must grow for the central bank to achieve a long-run target inflation rate of π depends on various factors such as the velocity of money and the real output of the economy. However, some economists, including Nobel laureate Milton Friedman, argued that a steady growth in the money supply of 3% per year would be appropriate. This steady growth rate would roughly match the growth of the real economy over longer time periods.