Suppose that this year's money supply is $500 billion, nominai GDP is $10 trilion, and real GOP is $5 trilion. The price level is ). and the velocity of money is Suppose that velocity is constant and the economy's output of goods and services rises by 4 percent each year. Use this information to answer the questions that follow. ar the Fed keeps the money supply constant, the price level will and nominal GDP will True or False: If the Fed wants to keep the price level stable instead, it should decrease the money supply by 4% next year. O true O False Ir the Fed wants an inflation rate of 10 percent instead, it should the money supply by -(Hint: The quantity equation can be rewritten as the following percentage change formula: (Percentoge Chunge in M) +(Percentage Change in V) = (Percetage Change in P) + (Percentage Change in Y).)

Suppose that this year's money supply is $500 billion, nominai GDP is $10 trilion, and real GOP is $5 trilion. The price level is ). and the velocity of money is Suppose that velocity is constant and the economy's output of goods and services rises by 4 percent each year. Use this information to answer the questions that follow. ar the Fed keeps the money supply constant, the price level will and nominal GDP will True or False: If the Fed wants to keep the price level stable instead, it should decrease the money supply by 4% next year. O true O False Ir the Fed wants an inflation rate of 10 percent instead, it should the money supply by -(Hint: The quantity equation can be rewritten as the following percentage change formula: (Percentoge Chunge in M) +(Percentage Change in V) = (Percetage Change in P) + (Percentage Change in Y).)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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What are the immediate effects and the long-run effects if the Fed changes the quantity of money? If the Fed changes the quantity of money, the immediate effects are on and the long-run effects are on O A. the short-term nominal interest rate; the price level and the inflation rate B. the price level; the real interest rate and the inflation rate C. the inflation rate; the long-run nominal interest rate and the real interest rate D. the price level; the inflation rate
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