Answered: 4. Velocity and the quantity equation…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Consider a simple economy that produces only pies. The following table contains information on the economy's money supply, velocity of money, price level, and output. For example, in 2018, the money supply was $360, the price of a pie was $9.00, and the economy produced 800 pies.

NOTE:

for YEAR 2019, Price Level (Dollars), the choices are (0.47 OR 9.00 OR 9.45 OR 0.50)

nominal GDP options for YEAR 2018 are (85.00 OR 7,560.00 OR 7,200.00 OR 89.00)

nominal GDP options for YEAR 2019 are (89.00 OR 85.00 OR 7,560.00 OR 7,200.00 )

NOTE:

The money supply grew at a rate of _________ (2.44% OR 1.13% OR 5% OR 105%) from 2018 to 2019. Since pie output did not change from 2018 to 2019 and the velocity of money _______ (increased OR decreased OR remained the same), the change in the money supply was reflected ________ (partially OR entirely) in changes in the price level. The inflation rate from 2018 to 2019 was ________ (5% OR 2.44% OR 105% OR 1.13%)

4. Velocity and the quantity equation
Consider a simple economy that produces only pies. The following table contains information on the economy's money supply, velocity of money, price
level, and output. For example, in 2018, the money supply was $360, the price of a pie was $9.00, and the economy produced 800 pies.
Fill in the missing values in the following table, rounding to the nearest cent when necessary.
Quantity of Money
Price Level Quantity of Output
Nominal GDP
(Dollars)
Velocity of Money
(Dollars)
(Pies)
(Dollars)
Year
2018
360
9.00
800
2019
378
20
800
The money supply grew at a rate of
from 2018 to 2019. Since pie output did not change from 2018 to 2019 and the velocity of money
the change in the money supply was reflected
in changes in the price level. The inflation rate from 2018 to
2019 was

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