Suppose that initially the money supply is $1 trillion, the price level equals 3, the real GDP is $5 trillion in base-year dollars, 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 and prices, calculate the new price level after the increase in money supply: . b. Calculate the percentage increase in money supply: %. c. Calculate the percentage change in the price level: %. d. The percentage changes in the money supply is percentage changes in the price level. equal to the greater than the

Suppose that initially the money supply is $1 trillion, the price level equals 3, the real GDP is $5 trillion in base-year dollars, 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 and prices, calculate the new price level after the increase in money supply: . b. Calculate the percentage increase in money supply: %. c. Calculate the percentage change in the price level: %. d. The percentage changes in the money supply is percentage changes in the price level. equal to the greater than the

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter24: The Influence Of Monetary And Fiscal Policy On Aggregate Demand

Section: Chapter Questions

Problem 3CQQ

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