9. Using the data in Problem 7 along with the monetarists view of the relationship between money supply and GDP, answer the following:

1. If the M1 money supply increases by 10 percent and the M1 velocity of money does not change, what is the expected value of the GDP for next year?
2. 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?
3. 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?
4. Based on information from (c), if the price level does not change next year, what is the expected real output in units or products?

Here is my completed work from problem 7 for your reference:

7. Assume that the real output (RO) for a country is expected to be 2.4 million products.

1. If the price level (PL) is $250 per product, what will be the amount of the gross national product (GDP)?
   • GDP =RO*PL
   • GDP= $250*2.4M = $600 Million
2. Now assume that the GDP is projected to be $8 million next year. What will the PL of the products need to be to reach the GDP target?
   • GDP = $8 Million
   • $250*PL = 8M
   • PL = $8M / $250
   • PL = $32,000
3. Now assume that the RO of 2.4 million products is composed of equal amounts of two types of products. The first product sells for $100 each, and the second product sells for $500 each. What will be the size of the GDP?
   • RO = 2.4M
   • 1.2M*$100 = $120 Million
   • 1.2M*$500 = $600 Million
   • GDP = $120M+$600M
   • GDP = $720M