Activity #9 Explain how an increase in the price level affects the real value of money. . According to the quantity theory of money, what is the effect of an increase in the quantity of money? Suppose that this year's money supply is $500 billion. nominal GDP is $10 trillion and real GDP is $5 trillion. a,. What is the price level? What is the velocity of money? b. Suppose that the velocity is constant and the economy's output of goods and services rise by 5 percent each year? What will happen to nominal GDP and the price level next year if the Fed keeps the money supply constant? c. What money supply should the Fed set next year if it wants to keep the price level stable? d. What money supply should the Fed set next year if it wants inflation of 10 percent? In what sense is inflation like a tax? How does thinking about inflation as a tax help explain hyperinflation? . According to the Fisher effect, how does an increase in the inflation rate affect the real interest rate and the nominal interest rate? If inflation is less than expected. who benefitsdebtors or creditors? Explain