Suppose that initially the money supply is $1 trillion, the price level equals 3, the real GDP is $5 trillon in base-year donars, and income velocity of money is 15. Then the money supply increases by $100 billion, while real GDP and income velocity of money remain unchanged. a. According to the quantity theory of money andprices, calculate the new price level after the increase in money supply::

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
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Chapter1: Making Economics Decisions
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Suppose that initially the money supply is $1 trillion, the price level equals 3, the real GDP is$5 trillion in base-year donars, and income velocity of money is 15. Then
the money supply increases by $100 billion, while real GDP and income velocity of money remain unchanged.
a. According to the guantity theory of money and prices, calculate the new price level after the increase in money supply:
Transcribed Image Text:Suppose that initially the money supply is $1 trillion, the price level equals 3, the real GDP is$5 trillion in base-year donars, and income velocity of money is 15. Then the money supply increases by $100 billion, while real GDP and income velocity of money remain unchanged. a. According to the guantity theory of money and prices, calculate the new price level after the increase in money supply:
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