Suppose that this year's money supply is $2 trilion, nominal GDP is $10 villion, and real GDP is S8 trillon (a) What is the price level? What is the velocity of money? (b) Suppose that velocity is constant, and the economy's output of goods and services rises by 15 percent each year. What will happen to nominal GOP and the price level next year if the Fed keeps the money supply constant? (c) What money supply should the Fed set next year if it wants to keep the price level stable, given that velocity is constant, and the economy's output of goods and services has risen by 15%? (d) What money supply should the Fed set next year iit wants inflution of 5 percent, with velocity stila constant and the economy's output of goods and services irisen by 15%?

Suppose that this year's money supply is $2 trilion, nominal GDP is $10 villion, and real GDP is S8 trillon (a) What is the price level? What is the velocity of money? (b) Suppose that velocity is constant, and the economy's output of goods and services rises by 15 percent each year. What will happen to nominal GOP and the price level next year if the Fed keeps the money supply constant? (c) What money supply should the Fed set next year if it wants to keep the price level stable, given that velocity is constant, and the economy's output of goods and services has risen by 15%? (d) What money supply should the Fed set next year iit wants inflution of 5 percent, with velocity stila constant and the economy's output of goods and services irisen by 15%?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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3. Suppose the money demand function is: Md/P = 1,000 - 100r where r is real interest rate in percent. Money supply is 1,000 and the price level (P) is 2 What is the equilibrium interest rate? Draw a graph to show Md and Ms, indicate the equilibrium interest rate and real money balance. c. Assumed the price level is fixed. If the Fed wishes to raise the interest rate to 7%, what money supply should it set? Show your answers in the same graph of B). B. D. Base on the new Ms in C), government would like to restore the interest rate back to the original equilibrium level by changing Md, what should be the new price level? Show your answers in the same graph of B).
ents Correct Answer You Answered Suppose the Fed conducts monetary policy by targeting nominal expenditure growth to 8%. If Y = 3, and = 3. What policy should the Fed take? Contractionary policy, increasing the money supply by selling bonds, so interest rates decrease The Fed should do Nothing Expansionary policy, increasing the money supply by buying bonds. so interest rates decrease Contractionary policy, decreasing the money supply by selling bonds, so interest rates increase 4 None of the above are correct Q Search Contractionary policy, decreasing the money supply by selling be 13
7. According to the quantity theory of money, which variable is most stable in thelong run?a. Velocityb. Outputc. Moneyd. Price Levels
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During contractionary face of business cycle which of the following most likely occurs? Which of the following pairs of terms is used to describe fluctuation in the economy?
The GDP deflator in year 2 is a b Question 27 с Selected answer will be automatically saved. For keyboard navigation, press up/down arrow keys to select an answer. d 177.2 125.7 95.4 Prod Car 105.8 Cen Dene Quarnity (1 M 30 100 (1) 30 S Quarter (2) 100 15 150 25 P 30 30
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5. Velocity and the quantity equation Consider a simple economy that produces only streaming devices. The following table contains information on the economy's money supply, velocity of money, price level, and output. For example, in 2021, the money supply was $240, the price of a streaming device was $10.00, and the economy produced 600 streaming devices. Fill in the missing values in the following table, selecting the answers closest to the values you calculate. Year Quantity of Money Velocity of Money Price Level Quantity of Output Nominal GDP (Dollars) (Dollars) (Streaming devices) (Dollars) 2021 240 10.00 600 2022 252 25 600 The money supply grew at a rate of from 2021 to 2022. Since streaming device output did not change from 2021 to 2022 and the velocity of money, the change in the money supply was reflected in changes in the price level. The inflation rate from 2021 to 2022 was
Only D please
12. Suppose that the money demand function is: d = 900 - 60i where r is the interest rate in percent. The money supply M is 3,000 and the price level P is fixed at 6. (optional) a. Graph the supply and demand for real money balances. Make sure to label all curves and axes. b. What is the equilibrium interest rate? What happens to the equilibrium interest rate if the supply of money is reduced from 3,000 to 2,400? Show your work. a. If the central bank wants the interest rate to be 3 percent, what money supply should it set? Show your work.
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