Suppose the money supply M has been growing at 19% per year and nominal GDP, PY, has been growing at 77% peryear. The data are as follows (in billions of dollars).MPYV20214004000202247670802023566.4412,532Calculate the velocity V in each year. (Fill in the table above, rounding to one decimal place.)Velocity is growing at an approximate rate of % per year. (Round to the nearest whole number.)

Velocity of money: The velocity of money (V) tells us how quickly money circulates within an…

Answered: Suppose the money supply M has been…

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter15: The Debate Over Monetary And Fiscal Policy

Section: Chapter Questions

Problem 1TY

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Suppose the money demand function is ▪ Md/P = 1000+ 0.2Y - 1000 (r + πе). (a) Calculate velocity if Y = 2000, r = .06, and Te = .04. (b) If the money supply (Ms) is 2600, what is the price level? "(c) Now suppose the real interest rate rises to 0.11, but and Ms are unchanged. What happens to velocity, and the price level? So if the hominal interest rate were to rise from 0.10 to 0.15 over the course of a year, with Y remaining at 2000, what would the inflation rate be?
(b) Assume that a country’s nominal GDP was measured at $1500 billion in a year and the volume of money (i.e. M1) circulating in the economy the same year was $400 billion. Using the equation of exchange, determine the velocity of money during the year.
Compute nominal GDP if velocity remains constant at 5 and the money supply increases from GHS200bn to GHS300bn
The equation for the velocity of money is defined as: MV=PR MV=PT MV=MV MV=PY None of the above.
In an economy at its steady state, real GDP, Y, increases at the rate g+n, where g is the technological growth rate and n is the rate of population growth. The monetary base M is equal to nominal GDP divided by the velocity of i.e. M - PY/V where P is the price level. Thus, assuming the velocity of money is constant, the growth rate of the monetary base will be (approximately) money V ΔΜ =*+g+n M where is the inflation rate. The velocity of money is determined by the function V = V°ehi The nominal interest rate i is determined by i = r" +T, where the natural real interest rate r" is constant in steady state and taken as given. Assume that n = 0, g= 0.03, r" = 0.05, 6 =1, and V" = 20. (a) What is the seignorage as a fraction of nominal GDP, when inflation is a = 0.01? (b) What is the seignorage as a fraction of nominal GDP, when inflation is a =0.10? (c) What rate of inflation w maximizes seignorage? (d) What is the maximal seignorage as a fraction of nominal GDP?
A standard "money demand" function used by macroeconomists has the form In(m) = Po + B₁In(GDP) + B₂R, Where m is the quantity of (real) money, GDP is the value of (real) gross domestic product, and R is the value of the nominal interest rate measured in percent per year. Supposed that B₁ = 2.32 and B₂ = -0.02. What is the expected change in m if GDP increases by 9%? The value of m is expected to by approximately %. (Round your response to the nearest integer)
If the money supply is growing at a rate of 6 percent per year, real GDP (real output) is growing at a rate of 2 percent per year, and velocity is constant, what will the inflation rate be? %. (Enter your response as an integer value.)
3 Money demand function · Suppose a country has a money demand function: M. 0.5Y i a) Is velocity a constant value? If not, please derive the expression for velocity of money. b) Now assume the interest rate is 2.5%, calculate the velocity.
In an economy at its steady state, real GDP, Y, increases at the rate g+n, where g is the technological growth rate and n is the rate of population growth. The monetary base M is equal to nominal GDP divided by the velocity of money V i.e. M = PY/V where P is the price level. Thus, assuming the velocity of money is constant, the growth rate of the monetary base will be (approximately) ΔΜ = +g+n M where is the inflation rate. The velocity of money is determined by the function V = V°ebi The nominal interest rate i is determined by i = r" +7, where the natural real interest rate r" is constant in steady state and taken as given. Assume that n = 0, g = 0.03, r" = 0.05, b =1, and Vo = 20. (a) What is the seignorage as a fraction of nominal GDP, when inflation is T = 0.01? (b) What is the seignorage as a fraction of nominal GDP, when inflation is a = 0.10? (c) What rate of inflation maximizes seignorage? (d) What is the maximal seignorage as a fraction of nominal GDP?
Suppose that the money supply will grow by 2% in Japan over the next five years. Velocity is constant. Real income is expected to grow at 3%. The inflation rate will be: 5% 3% 1% -1% none of the above
Assume that a country's money velocity remains constant and that the rate of money growth is 4%. A) What is the rate of spending growth? B) If money growth increases by 1.5 percentage points and consumption growth increases by 0.5 percentage points, what is the new rate of spending growth? C) Given your answer in Part B, what is the long-run rate of real GDP growth at an inflation rate of 4%?
Money demand is given by Md/P = 1423 + 0.8Y-1202i Given that P = 173, Y = 2987, and i = 0.15, velocity is equal to (two decimal points) Answer

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