3. Suppose that in a given year the money supply is $500 billion, nominal GDP is $10 trillion, and real GDP is $5 trillion. a) Calculate the price level in this economy. b) Calculate the velocity of money in this economy. c) Assume that the velocity of money is constant (it does not change). If the economy’s output of goods and services increases by 5 percent in a year, what will happen to the price level if the Federal Reserve keeps the money supply unchanged? d) What option could the Federal Reserve implement if it wanted to avoid the outcome described in the previous question? Explain.

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