Q1. In 2019, an economy produces wheat only and has enough labor, capital, and land to produce 500 bushels of wheat (Y or real GDP). Price of wheat and money supply are $2 per bushel and $1,000 respectively. In 2020, the central bank increases money supply by $ 1040. Suppose both the velocity of money (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.

Q1. In 2019, an economy produces wheat only and has enough labor, capital, and land to produce 500 bushels of wheat (Y or real GDP). Price of wheat and money supply are $2 per bushel and $1,000 respectively. In 2020, the central bank increases money supply by $ 1040. Suppose both the velocity of money (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.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Suppose a country's nominal GDP is $120 billion. The money supply is $100 billion. What is the velocity?
I would like to ask how to calculate c and d
21.According to the quantity theory of money, ultimate control over the rate of inflation in the United States is exercised by: A)the Organization of Petroleum Exporting Countries (OPEC). B)the U.S. Treasury. C)the Federal Reserve. D)private citizens. 22.According to the quantity theory of money, if money is growing at a 10 percent rate and real output is growing at a 3 percent rate, but velocity is growing at increasingly faster rates over time as a result of financial innovation, the rate of inflation must be: A)increasing. B)decreasing. C)7 percent. D)constant. 23.If the money supply increases 12 percent, velocity decreases 4 percent, and the price level increases 5 percent, then the change in real GDP must be ______ percent. A)3 B)4 C)9 D)11 24.Percentage change in P is approximately equal to the percentage change in: A)M. B)M minus percentage change in Y. C)M minus percentage change in Y plus percentage change in velocity. D)M minus…
40
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
QUESTION THREE Assuming a constant velocity of money while the money supply is growing 10% per year, real GDP is growing at 4% per year, and the real interest rate is r = 8%. Assume that actual Inflation is equal to expected inflation. a) Find the value of the nominal interest rate in this economy b) If the central bank increases the money growth rate by 4% per year, find the change in the nominal interest rate Ai C) Suppose the growth rate of Y falls to 2% per year. What will happen to inflation? What must the central bank do if it wishes to keep inflation constant?
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?
32. An economy is currently producing above Potential Output. An Increase in the Money Supply will: A. Increase Spending, Output, and Inflation more B. Move the Economy back to Potential GDP C. Do nothing D. Decrease Inflation, Lower Interest Rates, Increase Spending
If real output in an economy is 1,500 goods per year , the money supply is $ 350 , and each dollar is spent an average of 3 times per year then 5 points
An economy has a money supply of 1,052, money velocity of 10, and output of 1,048. How much will the price level change if output and money supply remain the same and the money velocity rises to 16? Round your answer to the nearest two decimal place.
According to the quantity theory of money, delation of money supply is the result of when _____ deceases while the money supply and velocity of money are stable a.Unemployment b.Nominal interest rates c.Real gdp d.Money demand