Question 2 Pretend that you ascribe to the Classical theory of economics. a) Using the equation of exchange, if the money supply is $8 trillion, the price level is 4, and the level of output (real GDP) is $15 trillion, then the velocity of money is equal to? b) If you double the money supply, what is the most likely long-run effect on the price level and real GDP? c) What do classical economists believe about the government, central bank, fiscal policy, and monetary policy? What reasons do they provide for their thinking?

Question 2 Pretend that you ascribe to the Classical theory of economics. a) Using the equation of exchange, if the money supply is $8 trillion, the price level is 4, and the level of output (real GDP) is $15 trillion, then the velocity of money is equal to? b) If you double the money supply, what is the most likely long-run effect on the price level and real GDP? c) What do classical economists believe about the government, central bank, fiscal policy, and monetary policy? What reasons do they provide for their thinking?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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