Question: I was able to get a. correct as 3.3 but cannot get the rest correct. Suppose that initially the money supply is $1 trillion, the
I was able to get a. correct as 3.3 but cannot get the rest correct.
Suppose that initially the money supply is $1 trillion, the price level equals 3, the real GDP is $5 trillion inbase-year dollars, and income velocity of money is 15. Then the money supply increases by $100 billion, while real GDP and income velocity of money remain unchanged.
a. According to the quantity theory of money and prices, calculate the new price level after the increase in moneysupply:
3.3
b. Calculate the percentage increase in moneysupply:
c. Calculate the percentage change in the price level:
d. The percentage changes in the money supply is ________ percentage changes in the price level.
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