Question 1. A country’s money supply equals 300 bln USD, nominal GDP equals 3000 bln USD, and real GDP – 1500 bln USD in 2018. Calculate the price level and the velocity of money. Assume output increases by 10% next year. Determine what money supply should the central bank of this country set next year in order to keep the prices stable. Discuss what can happen if the growth of a country's money supply is faster than the growth of its output. Use the quantity theory of money to support your statement.
Question 1. A country’s money supply equals 300 bln USD, nominal GDP equals 3000 bln USD, and real GDP – 1500 bln USD in 2018. Calculate the price level and the velocity of money. Assume output increases by 10% next year. Determine what money supply should the central bank of this country set next year in order to keep the prices stable. Discuss what can happen if the growth of a country's money supply is faster than the growth of its output. Use the quantity theory of money to support your statement.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question 1. A country’s money supply equals 300 bln USD, nominal
Calculate the
Assume output increases by 10% next year. Determine what money supply should the central bank of this country set next year in order to keep the prices stable.
Discuss what can happen if the growth of a country's money supply is faster than the growth of its output. Use the quantity theory of money to support your statement.
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