Using the quantity Theory of Money formula, suppose that in 2020: Money supply = $50 Billion; Nominal GDP = $1.0 Trillion; and Real GDP = $500 Billion.
a). Calculate the Price Level (P) (2 marks) and Velocity of Circulation (V) (2 marks). Show your calculations for a full mark.
b) Suppose the velocity of circulation is constant (the one you calculated in (a), and the economy’s output of goods and services increases by 5% annually. Calculate Nominal GDP (or what will happen to nominal GDP) (3 marks) and the Price Level (P) (3 marks) in 2021 if the Bank of Canada keeps the money supply in 2020 constant or the same?
c). Calculate or What level of money supply should the Bank of Canada set next year (2021) if it wants to keep the price level stable (hint: based on a 5% increase in real GDP). (5 marks)
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Using the quantity Theory of Money formula, suppose that in 2020: Money supply = $50 Billion; Nominal...
Using the quantity Theory of Money formula, suppose that in 2020: Money supply = $50 Billion; Nominal GDP = $1.0 Trillion; and Real GDP = $500 Billion. a). Calculate the Price Level (P) and Velocity of Circulation (V) . Show your calculations for a full mark. b) Suppose the velocity of circulation is constant (the one you calculated in (a), and the economy’s output of goods and services increases by 5% annually. Calculate Nominal GDP (or what will happen to...
Suppose that this year's money supply is $500 billion, nominal GDP is $10 trillion and real GDP is $5 trillion. a. What is the price level? b. What is the velocity of money? (Please calculate your answers in billions, i.e. leave off the zeros (0) if necessary.) c. Suppose that velocity is constant and the economy's output of goods and services rises by five percent each year. What will happen to nominal GDP and the price level next year if the Fed...
Suppose that this years money supply is $500 billion, nominal GDP is $6 trillion, and real GDP is $2 trillion. 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 3% each year. What will happen to nominal GDP and the price level next year if the Fed keeps the money supply constant? c. What money supply should the Fed set next...
Calculate what happens to nominal GDP If velocity remains constant at 5 and the money supply increases from $250 billion to $375 billion Originally, nominal GDP is S trillion. (Round your response to two decimal places.) After the money supply increases nominal GDP is
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Suppose that the money supply and the nominal GDP for a hypothetical economy are $48 billion and $336 billion, respectively. If the central bank reduces the money supply by $20 billion, by how much will nominal GDP have to fall to restore equilibrium, according to the monetarist perspective?
If real GDP is $ 2.0 trillion, the money supply is $ 500 billion, and the price level is 1.75, we know that velocity is
When the money demand curve shifts right and the money supply is unchanged, the equilibrium price level decreases and the equilibrium value of money increases. true false The money supply in Grayfield is $8 billion. Nominal GDP is $32 billion and real GDP is $24 billion. The central bank of Grayfield has instituted a policy of zero inflation. Assuming that velocity is stable, if real GDP grows by 2.5 percent this year then the central bank of Grayfield will increase...
Question 20 (6 points) Suppose full employment real GDP is $1,000 billion and the money supply is $800 billion. Suppose also that the monetary velocity is constant and equal to 5. What is the price level? _.00 Now suppose the Fed increases the money supply by 4% and potential real GDP rises by 3%. In the long run, the inflation rate would be _.00% A/
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