Need both of these. True or false questions. I am not 100% certain on my answers. The basic quantity equation of money is MV = PQ, where M is the money supply, V is the velocity of money, P is the price level, and Q is the real output of the economy(I got true on this one). The data show that the velocity of M1 is unchanging, which is one reason for why there is very little uncertainty as to the effects of monetary policy(I got true for this one).

Need both of these. True or false questions. I am not 100% certain on my answers. The basic quantity equation of money is MV = PQ, where M is the money supply, V is the velocity of money, P is the price level, and Q is the real output of the economy(I got true on this one). The data show that the velocity of M1 is unchanging, which is one reason for why there is very little uncertainty as to the effects of monetary policy(I got true for this one).

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter15: The Debate Over Monetary And Fiscal Policy

Section: Chapter Questions

Problem 2DQ

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These are true or false. Need help with both please. The basic quantity equation of money is MV = PQ, where M is the money supply, V is the velocity of money, P is the price level, and Q is the real output of the economy. (I got false on this one, but I have a feeling that the answer should be true). The data show that the velocity of M1 is unchanging, which is one reason for why there is very little uncertainty as to the effects of monetary policy. (I got true on this one, but I am not 100% sure).
This question uses approximate data from 2020. Over the year real GDP declined by about 3 percent, the inflation rate was about 1 percent, and the money supply increased by about 25 percent. What does this tell us about the velocity of money and the quantity equation (MV PY) over the year 2020. = Question 26 options: That velocity must have increased by a substantial amount. That velocity must have decreased by a substantial amount. That velocity was constant. That the quantity equation is not correct.
Suppose an economy has a price index at 15, real GDP of $11.09 trillion, and a money supply (M2) of $23.67 trillion. What is the M2 velocity of money for this economy? Round this to two digits after the decimal.
Suppose the supply of money, measured by M1, is $3.0 trillion, output, measured by real GDP, is $18.7 trillion, and the velocity of money is 7.1. Suppose the supply of money increases to $3.7 trillion but GDP and the velocity of money do not change. What is the percent by which prices change? Provide your answer as a percentage rounded to two decimal places. Do not include any symbols, such as "$," "," "%," or "," in your answer. Your Answer: Answer
The quantity equation of money can be written as: Money Supply (M) x Velocity (V) GDP Deflator (P) x Real GDP (Y) or MV PY = In a hypothetical economy, the money supply is €125 billion, real GDP is €1,000 billion, and the GDP deflator is 1.3. Therefore, velocity, which measures how frequently money is turned over in the economy, must be The quantity equation can also be written as: Money Growth + Velocity Growth Inflation + Real GDP Growth = If the money supply growth is 5% per year, velocity growth is 0% per year, and real GDP growth is 2% per year, then according to the quantity equation, inflation must be %. Now assume the money supply growth increases by 10% while real GDP growth and velocity growth remain the same. The inflation by %.
If the money supply increases by 7%, the price level by 2%, and the real output by 6%, then according to the equation of the quantitative theory of money, the velocity of money increases by:
Assume that a country's money velocity remains constant and that the rate of money growth is 4%. A) What is the rate of spending growth? B) If money growth increases by 1.5 percentage points and consumption growth increases by 0.5 percentage points, what is the new rate of spending growth? C) Given your answer in Part B, what is the long-run rate of real GDP growth at an inflation rate of 4%?
Question 41 6. Table 6-1 contains historical data for nominal GDP, M1, and M2. 6.1 Use this data to compute V1, velocity based on M1; and V2, velocity based on M2. Be sure to round your answers for velocity to two decimal places. Note that Nominal GDP indicates PY in the quantity theory of money. Table 6-1. GDP, Money, and Velocity Year Nominal GDP ($B) M1 ($B) 1995 1996 1997 1998 1999 7,000 7,500 8,300 8,700 9,200 900 1,100 1,000 1,200 1,300 M2 ($B) 3,200 3,700 3,600 4,100 4,300 V1 V2
Do not type in dollar signs or round any of your answers. In year one, the money supply (M) is equal to 500, the velocity of money (V) is 5, and the price level is 1.0. According to the equation of exchange, in year 1, nominal and real GDP are both equal to In year 2, the money supply is increased to 530.4 and velocity is unchanged. If the economy grew at the rate of 4 percent, real GDP in year 2 is equal to while nominal GDP in year 2 is equal to As a result of the Fed's decision to increase the money supply from 500 to 530.4, the price level rose from 1.0 to indicating that the inflation rate was percent.
Suppose the liquidity preference function is given by: Y L(i,Y) = 70 - 1,000i 10 Calculate velocity for each period, using the money demand equation: Y V= L(i,Y) along with the following table of values. (Round your responses to two decimal places.) Period 1 Period 2 Period 3 Period 4 Period 5 Period 6 Period 7 Y (in billions) 12,200 12,450 12,900 13,000 13,300 12,500 0.06 12,500 Interest rate 0.05 0.06 0.03 0.07 0.03 0.08 Velocity
1) Assume that velocity (how many times a dollar is used in a given period) stays the same, and that GDP does not change. If the money supply doubles, what will happen to the general price level in the economy according to the quantity equation? A) The inflation rate will double. B) The price level will fall by a half. C) The price level will double. D)The price level will not change either. 2) During the financial crises and recession of 2007-09, the Fed lowered the federal funds rate target to 0-0.25%. However, long-term interest rates, like mortgage rates, were still fairly high. One thing the Fed did to lower long-term rates was that the Fed : A) bought long-term bonds B) lowered the long-term interest rates by lowering the reverse repo rate C) lowered the long-term interest rates by lowering the discount rate D) sold long-term bonds
Suppose that velocity of money is constant, the expected inflation rate is always equal to the actual inflation rate, and the expected real interest rate is 3%. Answer the following questions. Justify your answers. a)Let the growth rate of the money supply rise to 10% without affecting the growth rate of real GDP or velocity. What happens to the inflation rate? If this new inflation rate becomes the expected inflation rate what happens to the nominal interest rate? b)Has the increase in the growth rate of money supply been generated by an open market operation conducted by the central bank? If so, how did the central bank generate this increase in the money supply? Only a qualitative answer is required.