Question

Using the data in Problem 8, along with the monetarists’ view of the relationship between money supply and GDP, answer the following:
a. If the M1 money supply increases by 10 percent and the M1 velocity of money does not change, what is the expected value of GDP next year?
b. Based on the information from (a), if real output does not change next year, what is the expected average price for the products. What percentage change, if any, would take place in the price level?
c. If the M2 money supply decreases by 10 percent and the M2 velocity of money does not change, what is the expected value of GDP next year?
d. Based on information from (c), if the price level does not change next year, what is the expected real output in units or products?


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  • CreatedMarch 27, 2015
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