The quantity equation of money can be written as: Money Supply (M) x Velocity (V) GDP Deflator (P) x Real GDP (Y) or MV PY %3D In a hypothetical economy, the money supply is €125 billion, real GDP is €1,000 billion, and the GDP deflator is 1.3. Therefore, velocity, which measures how frequently money is economy, must be The quantity equation can also be written as: Money Growth + Velocity Growth Inflation + Real GDP Growth If the money supply growth is 5% per year, velocity growth is 0% per year, and real GDP growth is 2% per year, then according to the quantity equation, inflation must be Now assume the money supply growth increases by 10% while real GDP growth and velocity growth remain the same. The inflation v by %.

The quantity equation of money can be written as: Money Supply (M) x Velocity (V) GDP Deflator (P) x Real GDP (Y) or MV PY %3D In a hypothetical economy, the money supply is €125 billion, real GDP is €1,000 billion, and the GDP deflator is 1.3. Therefore, velocity, which measures how frequently money is economy, must be The quantity equation can also be written as: Money Growth + Velocity Growth Inflation + Real GDP Growth If the money supply growth is 5% per year, velocity growth is 0% per year, and real GDP growth is 2% per year, then according to the quantity equation, inflation must be Now assume the money supply growth increases by 10% while real GDP growth and velocity growth remain the same. The inflation v by %.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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