the effect on the nominal GDP when the money supply increases by 5% and velocity remains unchanged. Concept Introduction: As per the equation of exchange, M×V=P×Y , where M is the quantity of money, V is its velocity , Y is nominal GDP, and P is the price level. This equation explains that total spending is equal to total receipts. Thus, an increase in the quantity of money in the economy will lead to an increase in the price level, assuming the velocity and output level remains constant. Also, if there is an increase in the output level, it can lead to increase in demand for M, however, if the M remains constant, it will affect the velocity of money. The equation also states that the quantity of money spent equals the quantity of money used. The quantity theory of money explains the link in the variables. V = P × Y M .

Question

A linear programming computer package is needed. As part of the settlement for a class action lawsuit, Hoxworth Corporation must provide sufficient cash to make the following annual payments (in thousands of dollars). 6 Year 1 23. 4 Payment 160 185 210 255 285 430 The annual payments must be made at the beginning of each year. The judge will approve an amount that, along with earnings on its investment, will cover the annual payments. Investment of the funds will be limited to savings (at 4% annually) and government securities, at prices and rates currently quoted in The Wall Street Journal. Hoxworth wants to develop a plan for making the annual payments by investing in the following securities (par value = $1,000). Funds not invested in these securities will be placed in savings. Security Current Price 1 $1,055 Rate (%) Years to Maturity 6.750 3 2 $1,000 5.125 Assume that interest is paid annually. The plan will be submitted to the judge and, if approved, Hoxworth will be required to…

Answer 1

Question

Chapter 15, Problem 3.7PA

Sub-part

A

To determine

the effect on the nominal GDP when the money supply increases by 5% and velocity remains unchanged.

Concept Introduction: As per the equation of exchange, M×V=P×Y, where M is the quantity of money, V is its velocity, Y is nominal GDP, and P is the price level. This equation explains that total spending is equal to total receipts. Thus, an increase in the quantity of money in the economy will lead to an increase in the price level, assuming the velocity and output level remains constant. Also, if there is an increase in the output level, it can lead to increase in demand for M, however, if the M remains constant, it will affect the velocity of money. The equation also states that the quantity of money spent equals the quantity of money used. The quantity theory of money explains the link in the variables. V=P×YM .

Sub-Part

B

To determine

the effect on the nominal GDP when the money supply decreases by 8% and velocity remains unchanged.

Concept Introduction: As per the equation of exchange, M×V=P×Y, where M is the quantity of money, V is its velocity, Y is nominal GDP, and P is the price level. This equation explains that total spending is equal to total receipts. Thus, an increase in the quantity of money in the economy will lead to an increase in the price level, assuming the velocity and output level remains constant. Also, if there is an increase in the output level, it can lead to increase in demand for M, however, if the M remains constant, it will affect the velocity of money. The equation also states that the quantity of money spent equals the quantity of money used. The quantity theory of money explains the link in the variables. V=P×YM .

Sub-Part

C

To determine

the effect on the nominal GDP when the money supply increases by 5% and velocity decreases by 5%.

Concept Introduction: As per the equation of exchange, M×V=P×Y, where M is the quantity of money, V is its velocity, Y is nominal GDP, and P is the price level. This equation explains that total spending is equal to total receipts. Thus, an increase in the quantity of money in the economy will lead to an increase in the price level, assuming the velocity and output level remains constant. Also, if there is an increase in the output level, it can lead to increase in demand for M, however, if the M remains constant, it will affect the velocity of money. The equation also states that the quantity of money spent equals the quantity of money used. The quantity theory of money explains the link in the variables. V=P×YM .

Sub-Part

D

To determine

the effect on the price level in the short run in each of the situations.

Concept Introduction: As per the equation of exchange, M×V=P×Y, where M is the quantity of money, V is its velocity, Y is nominal GDP, and P is the price level. This equation explains that total spending is equal to total receipts. Thus, an increase in the quantity of money in the economy will lead to an increase in the price level, assuming the velocity and output level remains constant. Also, if there is an increase in the output level, it can lead to increase in demand for M, however, if the M remains constant, it will affect the velocity of money. The equation also states that the quantity of money spent equals the quantity of money used. The quantity theory of money explains the link in the variables. V=P×YM .

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A linear programming computer package is needed. As part of the settlement for a class action lawsuit, Hoxworth Corporation must provide sufficient cash to make the following annual payments (in thousands of dollars). 6 Year 1 23. 4 Payment 160 185 210 255 285 430 The annual payments must be made at the beginning of each year. The judge will approve an amount that, along with earnings on its investment, will cover the annual payments. Investment of the funds will be limited to savings (at 4% annually) and government securities, at prices and rates currently quoted in The Wall Street Journal. Hoxworth wants to develop a plan for making the annual payments by investing in the following securities (par value = $1,000). Funds not invested in these securities will be placed in savings. Security Current Price 1 $1,055 Rate (%) Years to Maturity 6.750 3 2 $1,000 5.125 Assume that interest is paid annually. The plan will be submitted to the judge and, if approved, Hoxworth will be required to…

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Answer 2

Question

Chapter 15, Problem 3.7PA

Sub-part

A

To determine

the effect on the nominal GDP when the money supply increases by 5% and velocity remains unchanged.

Concept Introduction: As per the equation of exchange, M×V=P×Y, where M is the quantity of money, V is its velocity, Y is nominal GDP, and P is the price level. This equation explains that total spending is equal to total receipts. Thus, an increase in the quantity of money in the economy will lead to an increase in the price level, assuming the velocity and output level remains constant. Also, if there is an increase in the output level, it can lead to increase in demand for M, however, if the M remains constant, it will affect the velocity of money. The equation also states that the quantity of money spent equals the quantity of money used. The quantity theory of money explains the link in the variables. V=P×YM .

Sub-Part

B

To determine

the effect on the nominal GDP when the money supply decreases by 8% and velocity remains unchanged.

Concept Introduction: As per the equation of exchange, M×V=P×Y, where M is the quantity of money, V is its velocity, Y is nominal GDP, and P is the price level. This equation explains that total spending is equal to total receipts. Thus, an increase in the quantity of money in the economy will lead to an increase in the price level, assuming the velocity and output level remains constant. Also, if there is an increase in the output level, it can lead to increase in demand for M, however, if the M remains constant, it will affect the velocity of money. The equation also states that the quantity of money spent equals the quantity of money used. The quantity theory of money explains the link in the variables. V=P×YM .

Sub-Part

C

To determine

the effect on the nominal GDP when the money supply increases by 5% and velocity decreases by 5%.

Concept Introduction: As per the equation of exchange, M×V=P×Y, where M is the quantity of money, V is its velocity, Y is nominal GDP, and P is the price level. This equation explains that total spending is equal to total receipts. Thus, an increase in the quantity of money in the economy will lead to an increase in the price level, assuming the velocity and output level remains constant. Also, if there is an increase in the output level, it can lead to increase in demand for M, however, if the M remains constant, it will affect the velocity of money. The equation also states that the quantity of money spent equals the quantity of money used. The quantity theory of money explains the link in the variables. V=P×YM .

Sub-Part

D

To determine

the effect on the price level in the short run in each of the situations.

Concept Introduction: As per the equation of exchange, M×V=P×Y, where M is the quantity of money, V is its velocity, Y is nominal GDP, and P is the price level. This equation explains that total spending is equal to total receipts. Thus, an increase in the quantity of money in the economy will lead to an increase in the price level, assuming the velocity and output level remains constant. Also, if there is an increase in the output level, it can lead to increase in demand for M, however, if the M remains constant, it will affect the velocity of money. The equation also states that the quantity of money spent equals the quantity of money used. The quantity theory of money explains the link in the variables. V=P×YM .

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Answer 3

Question

Chapter 15, Problem 3.7PA

Sub-part

A

To determine

the effect on the nominal GDP when the money supply increases by 5% and velocity remains unchanged.

Concept Introduction: As per the equation of exchange, M×V=P×Y, where M is the quantity of money, V is its velocity, Y is nominal GDP, and P is the price level. This equation explains that total spending is equal to total receipts. Thus, an increase in the quantity of money in the economy will lead to an increase in the price level, assuming the velocity and output level remains constant. Also, if there is an increase in the output level, it can lead to increase in demand for M, however, if the M remains constant, it will affect the velocity of money. The equation also states that the quantity of money spent equals the quantity of money used. The quantity theory of money explains the link in the variables. V=P×YM .

Sub-Part

B

To determine

the effect on the nominal GDP when the money supply decreases by 8% and velocity remains unchanged.

Concept Introduction: As per the equation of exchange, M×V=P×Y, where M is the quantity of money, V is its velocity, Y is nominal GDP, and P is the price level. This equation explains that total spending is equal to total receipts. Thus, an increase in the quantity of money in the economy will lead to an increase in the price level, assuming the velocity and output level remains constant. Also, if there is an increase in the output level, it can lead to increase in demand for M, however, if the M remains constant, it will affect the velocity of money. The equation also states that the quantity of money spent equals the quantity of money used. The quantity theory of money explains the link in the variables. V=P×YM .

Sub-Part

C

To determine

the effect on the nominal GDP when the money supply increases by 5% and velocity decreases by 5%.

Concept Introduction: As per the equation of exchange, M×V=P×Y, where M is the quantity of money, V is its velocity, Y is nominal GDP, and P is the price level. This equation explains that total spending is equal to total receipts. Thus, an increase in the quantity of money in the economy will lead to an increase in the price level, assuming the velocity and output level remains constant. Also, if there is an increase in the output level, it can lead to increase in demand for M, however, if the M remains constant, it will affect the velocity of money. The equation also states that the quantity of money spent equals the quantity of money used. The quantity theory of money explains the link in the variables. V=P×YM .

Sub-Part

D

To determine

the effect on the price level in the short run in each of the situations.

Concept Introduction: As per the equation of exchange, M×V=P×Y, where M is the quantity of money, V is its velocity, Y is nominal GDP, and P is the price level. This equation explains that total spending is equal to total receipts. Thus, an increase in the quantity of money in the economy will lead to an increase in the price level, assuming the velocity and output level remains constant. Also, if there is an increase in the output level, it can lead to increase in demand for M, however, if the M remains constant, it will affect the velocity of money. The equation also states that the quantity of money spent equals the quantity of money used. The quantity theory of money explains the link in the variables. V=P×YM .

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Answer 4

Question

Chapter 15, Problem 3.7PA

Sub-part

A

To determine

the effect on the nominal GDP when the money supply increases by 5% and velocity remains unchanged.

Concept Introduction: As per the equation of exchange, M×V=P×Y, where M is the quantity of money, V is its velocity, Y is nominal GDP, and P is the price level. This equation explains that total spending is equal to total receipts. Thus, an increase in the quantity of money in the economy will lead to an increase in the price level, assuming the velocity and output level remains constant. Also, if there is an increase in the output level, it can lead to increase in demand for M, however, if the M remains constant, it will affect the velocity of money. The equation also states that the quantity of money spent equals the quantity of money used. The quantity theory of money explains the link in the variables. V=P×YM .

Sub-Part

B

To determine

the effect on the nominal GDP when the money supply decreases by 8% and velocity remains unchanged.

Concept Introduction: As per the equation of exchange, M×V=P×Y, where M is the quantity of money, V is its velocity, Y is nominal GDP, and P is the price level. This equation explains that total spending is equal to total receipts. Thus, an increase in the quantity of money in the economy will lead to an increase in the price level, assuming the velocity and output level remains constant. Also, if there is an increase in the output level, it can lead to increase in demand for M, however, if the M remains constant, it will affect the velocity of money. The equation also states that the quantity of money spent equals the quantity of money used. The quantity theory of money explains the link in the variables. V=P×YM .

Sub-Part

C

To determine

the effect on the nominal GDP when the money supply increases by 5% and velocity decreases by 5%.

Concept Introduction: As per the equation of exchange, M×V=P×Y, where M is the quantity of money, V is its velocity, Y is nominal GDP, and P is the price level. This equation explains that total spending is equal to total receipts. Thus, an increase in the quantity of money in the economy will lead to an increase in the price level, assuming the velocity and output level remains constant. Also, if there is an increase in the output level, it can lead to increase in demand for M, however, if the M remains constant, it will affect the velocity of money. The equation also states that the quantity of money spent equals the quantity of money used. The quantity theory of money explains the link in the variables. V=P×YM .

Sub-Part

D

To determine

the effect on the price level in the short run in each of the situations.

Concept Introduction: As per the equation of exchange, M×V=P×Y, where M is the quantity of money, V is its velocity, Y is nominal GDP, and P is the price level. This equation explains that total spending is equal to total receipts. Thus, an increase in the quantity of money in the economy will lead to an increase in the price level, assuming the velocity and output level remains constant. Also, if there is an increase in the output level, it can lead to increase in demand for M, however, if the M remains constant, it will affect the velocity of money. The equation also states that the quantity of money spent equals the quantity of money used. The quantity theory of money explains the link in the variables. V=P×YM .

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Answer 5

Chapter 15, Problem 3.7PA

Sub-part

A

To determine

the effect on the nominal GDP when the money supply increases by 5% and velocity remains unchanged.

Concept Introduction: As per the equation of exchange, M×V=P×Y, where M is the quantity of money, V is its velocity, Y is nominal GDP, and P is the price level. This equation explains that total spending is equal to total receipts. Thus, an increase in the quantity of money in the economy will lead to an increase in the price level, assuming the velocity and output level remains constant. Also, if there is an increase in the output level, it can lead to increase in demand for M, however, if the M remains constant, it will affect the velocity of money. The equation also states that the quantity of money spent equals the quantity of money used. The quantity theory of money explains the link in the variables. V=P×YM .

Sub-Part

B

To determine

the effect on the nominal GDP when the money supply decreases by 8% and velocity remains unchanged.

Concept Introduction: As per the equation of exchange, M×V=P×Y, where M is the quantity of money, V is its velocity, Y is nominal GDP, and P is the price level. This equation explains that total spending is equal to total receipts. Thus, an increase in the quantity of money in the economy will lead to an increase in the price level, assuming the velocity and output level remains constant. Also, if there is an increase in the output level, it can lead to increase in demand for M, however, if the M remains constant, it will affect the velocity of money. The equation also states that the quantity of money spent equals the quantity of money used. The quantity theory of money explains the link in the variables. V=P×YM .

Sub-Part

C

To determine

the effect on the nominal GDP when the money supply increases by 5% and velocity decreases by 5%.

Concept Introduction: As per the equation of exchange, M×V=P×Y, where M is the quantity of money, V is its velocity, Y is nominal GDP, and P is the price level. This equation explains that total spending is equal to total receipts. Thus, an increase in the quantity of money in the economy will lead to an increase in the price level, assuming the velocity and output level remains constant. Also, if there is an increase in the output level, it can lead to increase in demand for M, however, if the M remains constant, it will affect the velocity of money. The equation also states that the quantity of money spent equals the quantity of money used. The quantity theory of money explains the link in the variables. V=P×YM .

Sub-Part

D

To determine

the effect on the price level in the short run in each of the situations.

Concept Introduction: As per the equation of exchange, M×V=P×Y, where M is the quantity of money, V is its velocity, Y is nominal GDP, and P is the price level. This equation explains that total spending is equal to total receipts. Thus, an increase in the quantity of money in the economy will lead to an increase in the price level, assuming the velocity and output level remains constant. Also, if there is an increase in the output level, it can lead to increase in demand for M, however, if the M remains constant, it will affect the velocity of money. The equation also states that the quantity of money spent equals the quantity of money used. The quantity theory of money explains the link in the variables. V=P×YM .

Answer 6

Chapter 15, Problem 3.7PA

Sub-part

A

To determine

the effect on the nominal GDP when the money supply increases by 5% and velocity remains unchanged.

Concept Introduction: As per the equation of exchange, M×V=P×Y, where M is the quantity of money, V is its velocity, Y is nominal GDP, and P is the price level. This equation explains that total spending is equal to total receipts. Thus, an increase in the quantity of money in the economy will lead to an increase in the price level, assuming the velocity and output level remains constant. Also, if there is an increase in the output level, it can lead to increase in demand for M, however, if the M remains constant, it will affect the velocity of money. The equation also states that the quantity of money spent equals the quantity of money used. The quantity theory of money explains the link in the variables. V=P×YM .

Answer 7

Chapter 15, Problem 3.7PA

Sub-part

A

To determine

the effect on the nominal GDP when the money supply increases by 5% and velocity remains unchanged.

Concept Introduction: As per the equation of exchange, M×V=P×Y, where M is the quantity of money, V is its velocity, Y is nominal GDP, and P is the price level. This equation explains that total spending is equal to total receipts. Thus, an increase in the quantity of money in the economy will lead to an increase in the price level, assuming the velocity and output level remains constant. Also, if there is an increase in the output level, it can lead to increase in demand for M, however, if the M remains constant, it will affect the velocity of money. The equation also states that the quantity of money spent equals the quantity of money used. The quantity theory of money explains the link in the variables. V=P×YM .

Answer 8

Sub-Part

B

To determine

the effect on the nominal GDP when the money supply decreases by 8% and velocity remains unchanged.

Concept Introduction: As per the equation of exchange, M×V=P×Y, where M is the quantity of money, V is its velocity, Y is nominal GDP, and P is the price level. This equation explains that total spending is equal to total receipts. Thus, an increase in the quantity of money in the economy will lead to an increase in the price level, assuming the velocity and output level remains constant. Also, if there is an increase in the output level, it can lead to increase in demand for M, however, if the M remains constant, it will affect the velocity of money. The equation also states that the quantity of money spent equals the quantity of money used. The quantity theory of money explains the link in the variables. V=P×YM .

Answer 9

Sub-Part

B

To determine

the effect on the nominal GDP when the money supply decreases by 8% and velocity remains unchanged.

Concept Introduction: As per the equation of exchange, M×V=P×Y, where M is the quantity of money, V is its velocity, Y is nominal GDP, and P is the price level. This equation explains that total spending is equal to total receipts. Thus, an increase in the quantity of money in the economy will lead to an increase in the price level, assuming the velocity and output level remains constant. Also, if there is an increase in the output level, it can lead to increase in demand for M, however, if the M remains constant, it will affect the velocity of money. The equation also states that the quantity of money spent equals the quantity of money used. The quantity theory of money explains the link in the variables. V=P×YM .

Answer 10

Sub-Part

C

To determine

the effect on the nominal GDP when the money supply increases by 5% and velocity decreases by 5%.

Concept Introduction: As per the equation of exchange, M×V=P×Y, where M is the quantity of money, V is its velocity, Y is nominal GDP, and P is the price level. This equation explains that total spending is equal to total receipts. Thus, an increase in the quantity of money in the economy will lead to an increase in the price level, assuming the velocity and output level remains constant. Also, if there is an increase in the output level, it can lead to increase in demand for M, however, if the M remains constant, it will affect the velocity of money. The equation also states that the quantity of money spent equals the quantity of money used. The quantity theory of money explains the link in the variables. V=P×YM .

Answer 11

Sub-Part

C

To determine

the effect on the nominal GDP when the money supply increases by 5% and velocity decreases by 5%.

Concept Introduction: As per the equation of exchange, M×V=P×Y, where M is the quantity of money, V is its velocity, Y is nominal GDP, and P is the price level. This equation explains that total spending is equal to total receipts. Thus, an increase in the quantity of money in the economy will lead to an increase in the price level, assuming the velocity and output level remains constant. Also, if there is an increase in the output level, it can lead to increase in demand for M, however, if the M remains constant, it will affect the velocity of money. The equation also states that the quantity of money spent equals the quantity of money used. The quantity theory of money explains the link in the variables. V=P×YM .

Answer 12

Sub-Part

D

To determine

the effect on the price level in the short run in each of the situations.

Concept Introduction: As per the equation of exchange, M×V=P×Y, where M is the quantity of money, V is its velocity, Y is nominal GDP, and P is the price level. This equation explains that total spending is equal to total receipts. Thus, an increase in the quantity of money in the economy will lead to an increase in the price level, assuming the velocity and output level remains constant. Also, if there is an increase in the output level, it can lead to increase in demand for M, however, if the M remains constant, it will affect the velocity of money. The equation also states that the quantity of money spent equals the quantity of money used. The quantity theory of money explains the link in the variables. V=P×YM .

Answer 13

Sub-Part

D

To determine

the effect on the price level in the short run in each of the situations.

Concept Introduction: As per the equation of exchange, M×V=P×Y, where M is the quantity of money, V is its velocity, Y is nominal GDP, and P is the price level. This equation explains that total spending is equal to total receipts. Thus, an increase in the quantity of money in the economy will lead to an increase in the price level, assuming the velocity and output level remains constant. Also, if there is an increase in the output level, it can lead to increase in demand for M, however, if the M remains constant, it will affect the velocity of money. The equation also states that the quantity of money spent equals the quantity of money used. The quantity theory of money explains the link in the variables. V=P×YM .

Answer 14

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Answer 25

Ch. 15 - Prob. 1.1PA Ch. 15 - Prob. 1.2PA Ch. 15 - Prob. 2.3PA Ch. 15 - Prob. 2.4PA Ch. 15 - Prob. 2.5PA Ch. 15 - Prob. 3.6PA Ch. 15 - Prob. 3.7PA Ch. 15 - Prob. 4.8PA Ch. 15 - Prob. 4.9PA Ch. 15 - Prob. 4.10PA

Solution Summary: The author explains the quantity theory of money or the equation of exchange developed by the economist Fisher assumes that the velocity is constant.

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Chapter 15 Solutions