Bundle: Essentials Of Economics, Loose-leaf Version, 8th + Lms Integrated Mindtap Economics, 1 Term (6 Months) Printed Access Card
8th Edition
ISBN: 9781337368087
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 22, Problem 2CQQ
To determine
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Assume the money supply is $600, the velocity of
money is 6, and the price level is $3. Using the
quantity theory of money: a. Determine the level
of real output. b. Determine the level of nominal
output. c. Assuming velocity remains constant,
what will happen if the money supply rises 20
percent? d. If the government established price
controls and also raised the money supply 5
percent, what would happen? Instructions: You
may select more than one answer. Click the box
with a check mark for correct answers and click to
empty the box for the wrong answers.
Let's assume that in our economy money supply is $15 billion, Velocity (V) is 5, and Output (Y) is $70 billlion in 2019. The base year is 2018.
A. Calculate the price level (P) in this economy.
B. What can you say about about inflation rate between 2018 and 2019.
C. Calculate the money supply in this economy if we want inflation to be zero (0).
D. If in 2021 this economy grows by 10% and money supply increases by 15%, what would be the inflation rate?
Fo
In 2019, an economy produces wheat only and has enough labor, capital, and land to produce 500bushels of wheat (Y or real GDP). Price of wheat and money supply are $2 per bushel and $1,000respectively. In 2020, the central bank increases money supply by $ 1040. Suppose both the velocity ofmoney (V) and the amount of wheat produced remain unchanged. a. Compute the velocity of money and nominal GDP in 2019. b. Calculate inflation rate in year 2020. c. Use a well-labelled money supply-demand diagram to illustrate and explain what happen to the pricelevel and the value of money after such money injection?
Chapter 22 Solutions
Bundle: Essentials Of Economics, Loose-leaf Version, 8th + Lms Integrated Mindtap Economics, 1 Term (6 Months) Printed Access Card
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- the money supply of Freedonia this year is $150 billion nominal GDP is $750 billion .assuming that velocity of money is stable. real GDP gross 2%this year. and money supply does not change what are the velocity, price level, and inflation ratearrow_forwardQuestion 2 a According to the quantity theory of money, if nominal GDP is $800, real GDP is $600, and money supply is $400, then Select one: a. the price level is ¾, and velocity is 2. b. the price level is 2/3, and velocity is 2. c. the price level is 1.33, and velocity is 2. d. the price level is 1.33, and velocity is 1.5. e. the price level is 1.33, and velocity is 1.4. Full explain this question and text typing work only We should answer our question within 2 hours takes more time then we will reduce Rating Dont ignore this linearrow_forwardAn economy is at full employment. The quantity of money is growing at 8.3 percent a year, the nominal interest rate is 9.5 percent a year, real GDP is growing at 5.0 percent a year, and the inflation rate is 3.1 percent a year. What is the change in the velocity of circulation? Why might it be changing? The velocity of circulation is _______. A. increasing by 3.1 percent a year B. decreasing by 0.2 percent a year C. increasing by 0.2 percent a year D. constantarrow_forward
- Please help on Part C and D.arrow_forwardProvide the equation for the velocity of money in terms of Price level (P), output (Y), and the amount of money in the economy (M) a) Explain what will happen to velocity if P increases and why. b) Explain what will happen to velocity if Y increases and why. c) Explain what will happen to velocity if M increases and why.arrow_forwardB9arrow_forward
- Q1. In 2019, an economy produces wheat only and has enough labor, capital, and land to produce 500 bushels of wheat (Y or real GDP). Price of wheat and money supply are $2 per bushel and $1,000 respectively. In 2020, the central bank increases money supply by $ 1040. Suppose both the velocity of money (V) and the amount of wheat produced remain unchanged. a. Compute the velocity of money and nominal GDP in 2019. b. Calculate inflation rate in year 2020. c. Use a well-labelled money supply-demand diagram to illustrate and explain what happen to the price level and the value of money after such money injection?arrow_forward* 49% Chapter 30 HW Problems.docx B:00 AM osition II > t 9:00 AM When the nominal interest rate is set at 4.5% and inflation is 2%, what is the real interest rate? <. at 10:00 PM pplications to the 1 at 11:30 PM Applications g and 021 at 11:59 PM Notifications M Inbox T To Do 333 Calendar $ % & 3 4 5 6 7 9. delete E T Y F G H Karrow_forwardWhich of the following statements are true about the velocity of money? Choose one or more: A. Velocity is part of the equation of exchange. B. Velocity is the number of times a unit of currency exchanges hands in a given year. C. An increase in velocity, all else being equal, increases real GDP. D. An increase in velocity, all else being equal, increases nominal GDP.arrow_forward
- Keynesian economists believe that __________________.Group of answer choices A. the velocity of money is stable B. changes in the money supply do not affect output C. the velocity of money is affected by changes in expectationsarrow_forwardIf GDP is 1,500 and the money supply is 400, what is velocity?arrow_forwardIf GDP now falls back to 1,500 and the money supply falls to 350, what is velocity?arrow_forward
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