Given the above, what will happen to the price level if the central bank increases quantity of money in circulation from 50,000 to 100,000? a) Price Level will decrease from 100 to 50 b) Price Level will increase from 100 to 500 c) Price Level will increase from 100 to 200 d) Price Level will remain unchanged e) None of the above.
Given the above, what will happen to the price level if the central bank increases quantity of money in circulation from 50,000 to 100,000? a) Price Level will decrease from 100 to 50 b) Price Level will increase from 100 to 500 c) Price Level will increase from 100 to 200 d) Price Level will remain unchanged e) None of the above.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
Given the above, what will happen to the
a) Price Level will decrease from 100 to 50
b) Price Level will increase from 100 to 500
c) Price Level will increase from 100 to 200
d) Price Level will remain unchanged
e) None of the above.
Transcribed Image Text:Given the following:
MV = PQ
V = 2
Q = 1000
P = 100
(Quantity of Money in circulation) x (Velocity of money) = (Price) x (Real output)
Velocity is equal to 2 and is constant
Output is equal to 1000 and the economy is at full employment
Price is equal to 100
Given the above, what will happen to the price level if the central bank increases quantity of money in circulation from 50,000 to
100,000?
O Price Level will decrease from 100 to 50
Price Level will increase from 100 to 500
Price Level will increase from 100 to 200
Price Level will remain unchanged
O None of the above.
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