Answered: Real GDP is $20 trillion, the quantity…

Real GDP is $20 trillion, the quantity of money is $10 trillion, and the velocity of circulation is 4. What is the price level? The price level is ____ Thank you!!

Survey of Economics (MindTap Course List)

9th Edition

ISBN:9781305260948

Author:Irvin B. Tucker

Publisher:Irvin B. Tucker

Chapter14: Aggregate Demand And Supply

Section14.A: Cost-push And Demand-pull Inflation Revisited

Problem 6SQP

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Real GDP is $20 trillion, the quantity of money is $10 trillion, and the velocity of circulation is 4. What is the price level? The price level is ___ thank sss !!
The following table gives the quantity of money demanded at various price levels (P), the money demand schedule. In the following table, fill in the column labeled Value of Money. Price Level (P) Value of Money (1/P) 0.80 1.00 1.33 2.00 Quantity of Money Demanded (Billions of dollars) 2.0 2.5 4.0 8.0 Now consider the relationship between the quantity of money that people demand and the price level. The lower the price level, the required to complete transactions, and the money people will want to hold in the form of currency or demand deposits. Assume that the Federal Reserve initially fixes the quantity of money supplied at $2.5 billion. money Use the orange line (square symbol) to plot the initial money supply (MS) set by the Fed. Then, referring to the previous table, use the blue connected points (circle symbol) to graph the money demand curve.
The following table gives the quantity of money demanded at various price levels (P), the money demand schedule. In the following table, fill in the column labeled Value of Money. Price Level (P) Value of Money (1/P) 1.00 1.33 2.00 4.00 Quantity of Money Demanded (Billions of dollars) 2.0 2.5 4.0 8.0 Now consider the relationship between the quantity of money that people demand and the price level. The lower the price level, the required to complete transactions, and the money people will want to hold in the form of currency or demand deposits. 1.25 Assume that the Federal Reserve initially fixes the quantity of money supplied at $2.5 billion. Use the orange line (square symbol) to plot the initial money supply (MS₁) set by the Fed. Then, referring to the previous table, use the blue connected points (circle symbol) to graph the money demand curve. (?) money
According to your graph, the equilibrium value of money is , therefore the equilibrium price level is Now, suppose that the Fed reduces the money supply from the initial level of $3.5 billion to $2 billion. In order to reduce the money supply, the Fed can use open market operations to the public. Use the purple line (diamond symbol) to plot the new money supply (MS2 ). Immediately after the Fed changes the money supply from its initial equilibrium level, the quantity of money supplied is than the quantity of money demanded at the initial equilibrium. This contraction in the money supply will people's demand for goods and services. In the long run, since the economy's ability to produce goods and services has not changed, the prices of goods and services will and the value of money will
If the government increases its expenditure on goods and services and as a result, the money wage rate increases, the economy has experienced _______.
Explain how an increase in a price level will affect the demand for money and the aggregate demand. Use relevant graphs to support your answer.
The following graph shows the money market in a hypothetical economy. The central bank in this economy is called the Fed. Assume that the Fed fixes the quantity of money supplied. Suppose the price level increases from 150 to 175. Shift the appropriate curve on the graph to show the impact of an increase in the overall price level on the market for money. (? 12 Money Supply 10 Money Demand Money Supply Money Demand 10 15 20 25 30 MONEY (Billions of dollars) After the increase in the price level, the quantity of money demanded at the initial interest rate of 6% will be v than the quantity of money supplied by the Fed at this interest rate. People will try to their money holdings. In order to do so, people will bonds and other interest-bearing assets, and bond issuers will find that they equilibrium at an interest rate of - interest rates until the money market reaches its new %. The following graph shows the economy's aggregate demand curve. Show the impact of the increase in the price…
The following table shows a money demand schedule, which is the quantity of money demanded at various price levels ( P ).Fill in the Value of Money column in the following table.Price Level (P) Value of Money (1/P) Quantity of Money Demanded (Billions of dollars)1.00 ______ 1.51.33 _______2.02.00 _______3.54.00 _______ 7.0Now consider the relationship between the price level and the quantity of money that people demand. The lower the price level, the money the typical transaction requires, and the money people will wish to hold in the form of currency or demand deposits.Assume that the Fed initially fixes the quantity of money supplied at $3.5 billion.Use the orange line (square symbol) to plot the initial money supply ( MS1 ) set by the Fed. Then, referring to the previous table, use the blue connected points (circle symbol) to graph the money demand curve.
Exercise A.1 Suppose the aggregate demand curve is given by the equation: Y = 480 + 30M/P. The full-employment level of output is 800 and the current nominal money supply is 15. If the economy is in full-employment equilibrium, calculate the current price level. P = (Round to three decimal places.)
160 150 140 130 120 110 100 PRICE LEVEL Aggregate Demand 0 100 200 300 400 500 000 700 800 REAL GDP (Billions of dollars) Which of the following are reasons the aggregate demand curve is downward sloping? Chelk all that apply. A higher price level decreases consumption through the substitution effect. A lower price level makes domestically produced goods less expensive than foreign goods. A higher price level decreases the real value of consumers' assets. As the aggregate price level rises, the cost of borrowing money will This phenomenon is known as the 8 90 Aggregate Demandi 80 causing the quantity of output demanded to: effect.
How do changes in government spending and taxes affect the equilibrium price level and real GDP?
Suppose that the money supply increases by 20 percent. If there is no inflation, what does the quantity theory of money tell us must happen to real GDP? (Assume that the velocity of money is constant.) Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a It must increase by more than 20% It must increase by less than 20% C It stays the same d. It must increase by 20%