3) Quantity Theory of Money problem: In year one, the money supply (M) is equal to 800, the velocity of money (V) is 8.5, and the price level is 1.0. In year 2, the money supply is increased to 848.64 and velocity is unchanged. Calculate real GDP in year 2 assuming the economy grew at the rate of 4 percent. Calculate the effect on the price level in year 2. Fill in all of the missing values below: Year 1 Year 2 800 848.64 Money Supply (M) 8.5 8.5 Velocity (V) Nominal GDP (PQ) 6,800 Real GDP (Q) 6,800 (growth rate = 4%) %3D Price Level (P) 1.0 (inflation rate =

3) Quantity Theory of Money problem: In year one, the money supply (M) is equal to 800, the velocity of money (V) is 8.5, and the price level is 1.0. In year 2, the money supply is increased to 848.64 and velocity is unchanged. Calculate real GDP in year 2 assuming the economy grew at the rate of 4 percent. Calculate the effect on the price level in year 2. Fill in all of the missing values below: Year 1 Year 2 800 848.64 Money Supply (M) 8.5 8.5 Velocity (V) Nominal GDP (PQ) 6,800 Real GDP (Q) 6,800 (growth rate = 4%) %3D Price Level (P) 1.0 (inflation rate =

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter12: Money Growth And Intlation

Section: Chapter Questions

Problem 2CQQ

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Do not type in dollar signs or round any of your answers. Modern Quantity Theory of Money Problem. In year one, the money supply (M) is equal to 400, the velocity of money (V) is 6, and the price level is 1.0. According to the equation of exchange, in year 1, nominal and real GDP are both equal to In year 2, the money supply is increased to 430.5 and velocity is unchanged. If the economy grew at the rate of 2.5 percent, real GDP in year 2 is equal to while nominal GDP in year 2 is equal to As a result of the Fed's decision to increase the money supply from 400 to 430.5, the price level rose from 1.0 to indicating that the inflation rate was percent.
3) Using figures for both the short run and the long run, show the effects of a permanent increase in the U.S. money supply. Try to line up your figures to the short and long run equilibria side by side. Assume that the U.S. real national income is constant.
1. Let’s consider a hypothetical economy where this year’s money supply is Tk.400, nominal GDP is Tk. 20000 and real GDP is Tk. 5000. a) Define quantity theory of money. b) Calculate the price level.c) Calculate the velocity of money.d) Suppose the central bank changes the money supply so that the new money supply is Tk. 200, calculate the new price level.e) Show stages b and d on a graph. #note: must needed e number ans
2. What is the relationship between the price level and the value of money? Which variable (s) will be affected if the money supply increases in the economy?
7. Consider the money demand in the money market model. Interest rate R changed. But the nominal money demand did not change because the price P fell. Answer how the interest rate change: Decreased or Increased, and answer how the real money demand would change: Decrease, Increase, or No change. Change in interest rate: Change in real money demand:
1. Let’s consider a hypothetical economy where this year’s money supply is Tk.100, nominal GDP is Tk. 40000 and real GDP is Tk. 5000.a) What does the quantity theory of money say?b) Calculate the price level.c) Calculate the velocity of money.d) Suppose the central bank changes the money supply so that the new money supply is Tk. 500, calculate the newprice level.
10. Which of the following statements is true? a. A decline in the general price level will result to a shift of the LM curve downwards b. A decline in the general price level will result to a shift of the LM curve upwards c. The general price level does not affect the LM curve d. Both a and b 11. Which of the following describes the equilibrium condition of the money market? a. The income and interest responsiveness of money demand are equal b. Income is equal to interest c. The demand for real balances is equal to real money supply d. The demand for goods is equal to the supply of goods
1. Suppose that the central bank sells government bonds. Use a graph of the money market to show what this does to the value of money and price level.
Q: Suppose that when everyone wakes up tomorrow, they discover that the government has given them an additional amount of money equal to the amount they already had. Explain what effect this doubling of the money supply will likely have on the following:a. The total amount spent on goods and servicesb. The quantity of goods and services purchased if prices are stickyc. The prices of goods and services if prices can adjust
Q47 Which of the following is the definition for the real supply of money? Select one: a. the actual quantity of money, rather than the officially reported quantity. b. the stock of high powered money only. c. the ratio of the real GDP to the nominal money supply. d. the stock of money measured in terms of goods, not dollars.
Question: Consider an economy where the velocity of money is constant, and the economy is at full employment. If the central bank decides to increase the money supply by 5% but at the same time, the government imposes new taxes that effectively remove 5% of the consumers' disposable income, what would be the likely short-term effect on the nominal Gross Domestic Product (GDP) and the general price level? A) Nominal GDP remains unchanged; the general price level increases. B) Nominal GDP increases; the general price level remains unchanged. C) Nominal GDP remains unchanged; the general price level decreases. D) Nominal GDP increases; the general price level increases. Please don't use chatgpt it is giving wrong answer. Please try do it with yourself.