1. Nominal GDP =P*Y, where P is the price level and Y is aggregate output (income) .We know from class slides that the velocity of money links money supply and nominalGDP. Given nominal GDP in a year is $10 trillion and the quantity of money (M1) is$2 trillion, what is the velocity? What is the meaning of this calculated velocity?2. Suppose that real money demand is represented by the equation M“/P= 0.25×Y.Calculate the velocity of money.3. Consider a five year $1000 semiannual coupon bond with a 5% coupon rate. If thebond is current trading for a price of $957.35, what is the bond's yield to maturity? Ifthe bond's yield to maturity increase a little bit, what will the bond's price be?4. Suppose a 7-year, $1,000 bond with an 8% coupon rate and semiannual coupons istrading with a yield to maturity of 6.75%. Is this bond currently trading at a discount,at par, or at a premium? Explain. If the yield to maturity of the bond rises to 7%,what price will the bond trade for?5. Suppose that you want to take a loan and that your local bank wants to charge youan annual real interest rate equal to 3%. Assuming that the annualized expected rateof inflation over the life of the bond is 1%, determine the nominal interest rate thatthe bank will charge you. What happens if, over the life of the loan, actual inflation is0.5%?

GIVEN:Nominal GDP = P*Y = $10 trillionMoney Supply (M1) = $2 trillion

Answered: 1. Nominal GDP =P*Y, where P is the…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Which of the following statements are true about the velocity of money? Choose one or more: A. Velocity is part of the equation of exchange. B. Velocity is the number of times a unit of currency exchanges hands in a given year. C. An increase in velocity, all else being equal, increases real GDP. D. An increase in velocity, all else being equal, increases nominal GDP.
1. Suppose velocity is 3, real output is 9000, and the price level is 1.5. What is the level of real money balances in this economy? 2. Considered the following data for an economy. Currency in circulation held by the public: CU = 400 dollars; Monetary Base: B = 800 dollars; currency/deposit ratio: cu = 0.25. What is the value of reserves in this economy? 3. Considered the following data for an economy. Currency in circulation held by the public: CU = 400 dollars; Monetary Base: B = 800 dollars; currency/deposit ratio: cu = 0.25. What is the value of the money multiplier in this economy? Please answer the three questions above (and highlight the answer if you can). Please explain the math/reasoning used
In 2019, an economy produces wheat only and has enough labor, capital, and land to produce 500bushels of wheat (Y or real GDP). Price of wheat and money supply are $2 per bushel and $1,000respectively. In 2020, the central bank increases money supply by $ 1040. Suppose both the velocity ofmoney (V) and the amount of wheat produced remain unchanged. a. Compute the velocity of money and nominal GDP in 2019. b. Calculate inflation rate in year 2020. c. Use a well-labelled money supply-demand diagram to illustrate and explain what happen to the pricelevel and the value of money after such money injection?
Use the Quantity Theory of Money: MV = P.Y An economy has a real output of 5,474 and a money supply of $39,571. On average, each dollar is spent 2.3 times. What is the price level for this economy? Round your answer to two decimal places.
Given that velocity is 4, real GDP is 8, and the price level is 2. Suppose that the Central Bank decides to increase nominal money supply to 6 while velocity remains unchanged, calculate the percentage change in nominal GDP.
If the GDP price index is 150, real GDP is $10 trillion, and the quantity of money is $5 trillion, what is the velocity of circulation? The velocity of circulation is _____? Thank you!!
V = (P X Y) divided by M, where V is the velocity of circulation, P is the price level, Y is real GDP, and M is the quantity of money. The GDP price index is 150, and the price level equals the GDP price index divided by 100. Use this information to find the valocity of circlulation If the GDP price index is 150, real GDP is $10 trillion, and the quantity of money is $5 trillion, what is the velocity of circulation? The velocity of circulation is ____
2. Suppose that in the U.S., the income velocity of money (V) is constant. Suppose, too, that every year, real GDP grows by 2.5 percent (%ΔY/year = 0.025) and the supply of money grows by 10 percent (%ΔM/year = 0.10). a. According to the Quantity Theory of Money, what would be the growth rate of nominal GDP = P×Y? Hint: %Δ(X×Y)  %ΔX + %ΔY.
Kindly help with the questions below. (1). If the growth rate of the money supply increases to 18% , velocity grows at 1% and the real GDP grows at 2% per year on average, then what will be the inflation rate? (2) . If norminal GDP is $7 trillion , and the money supply is $ 2 trillion , then what is the velocity of money?
Need help with this. If nominal GDP is $100 and the money supply is $25 then money velocity is?
Suppose that the Price level = 120, Supply of Money = $20 billion, and Real GDP = $4 billion. If the velocity of the money stays the same but Real GDP increases by 5%, what will happen to the price level if the supply of money increases by $5 billion? Select one: a. It will increase to 142.9 b. It will increase to 135.4 c. It will increase to 128.5 d. It will increase to 122.5 e. It will stay 120. These changes are offsetting
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