It€™s time to take control of the Federal Reserve (which controls the U.S. money supply). In this chapter, we€™re thinking only about the €œlong run,€ so Y (real GDP) is out of the Fed€™s control, as is v. The Fed€™s only goal is to make sure that the price level is equal to 100 each and every year€”that€™s just known as €œprice stability,€ one of the main goals of most governments.
In question 2, you acted like an economic forecaster: You knew the values of M, v, and Y and had to guess what the long-run price level would be. In this question, you will act like an economic policymaker: You know the values of v and Y, and you know your goal for P. Your job is to set the level of M so that your meet your price-level target.
In some years, there will be long-lasting shocks to v and Y, so your job as a policymaker is to offset those shocks by changing the supply of money in the economy. Some of these changes might not make you popular with the citizens, but they are part of keeping P equal to the price-level target. Fill in the following table:

Transcribed Image Text:

Year 1 25,000 2 100 500 100 500 100 400 100 200 100 400 100 600