# 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?

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?

## Answer to relevant Questions

The following information was gathered for the XYZ economy: velocity of money = 3.8 times; average price level = $85; and real output = 10,000 units. a. What is the nominal GDP for the XYZ economy? b. What ...Identify economic units in addition to business firms who might need funds from savers. Describe the M1 definition of the money supply and indicate the relative significance of the M1 components. Banks provide checking account services, accept savings deposits, and lend to borrowers. In other words, they are in the money business. We all have heard stories of banks or their partner firms “misplacing” or ...Tenth National Bank has common stock of $2 million, retained earnings of $5 million, loan loss reserves of $3 million, and subordinated notes outstanding in the amount of $4 million. Total bank assets are $105 million. ...Post your question

0