Question.3187 - 3.) in this problem, all amounts are shown in billionsSuppose this year's money supply is $800 billion, NGDP d $20 trillion and real GDP is $8 trillionA.) What is the price level? What is the velocity of money?B.) suppose the velocity is constant and the economy's output raises by 5% each year. What will be the NGDP 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.)Suppose the output still raises 5% next year, what money supply should the fed set next year if it wants inflation of -2%?E.) Because of the wide use of credit cards and other electronically payment, the velocity changed to 27. how much percentage is the change in velocity? The Fed set the target for economy growth at 5% next year and the inflation to be -2%, how much percentage changed?
Answer Below:
Suppose xxxx this xxxx s xxxxx supply xx billion xxxxxxx GDP xx trillion xxx real xxx is xxxxxxxx a xxxx is xxx price xxxxx What xx the xxxxxxxx of xxxxx b xxxxxxx that xxxxxxxx is xxxxxxxx and xxx economy x output xx goods xxx services xxxxx by xxxxxxx each xxxx What xxxx happen xx nominal xxx and xxx price xxxxx next xxxx if xxx Fed xxxxx the xxxxx supply xxxxxxxx c xxxx money xxxxxx should xxx Fed xxx next xxxx if xx wants xx keep xxx price xxxxx stable x Suppose xxx output xxxxx raises xxxx year xxxx money xxxxxx should xxx fed xxx next xxxx if xx wants xxxxxxxxx of x e xxxxxxx of xxx wide xxx of xxxxxx cards xxx other xxxxxxxxxxxxxx payment xxx velocity xxxxxxx to xxx much xxxxxxxxxx is xxx change xx velocity xxx Fed xxx the xxxxxx for xxxxxxx growth xx next xxxx and xxx inflation xx be x how xxxx percentage xxxxxx in xxxxx supply xxxx the xxx intend xx conduct xxxxxx In xxxx problem xxx amounts xxx shown xx billions x Nominal xxx P x Y xxx Y xxxx GDP xx P x x x Y xxxxxxx M x V x x x then x P x Y x b xx M xxx V xxx unchanged xxx Y xxxxx by xxxx because x x x P x Y x must xxxx by xx a xxxxxx nominal xxx is xxxxxxxxx c xx keep xxx price xxxxx stable xxx Fed xxxx increase xxx money xxxxxx by xxxxxxxx the xxxxxxxx in xxxx GDP xxxx because xxxxxxxx is xxxxxxxxx the xxxxx level xxxx be xxxxxx d xx the xxx wants xxxxxxxxx to xx - xx will xxxx to xxxxxxxx the xxxxx supply xx Thus x x x will xxxx causing x x x to xxxx with x decrease xx prices xxx a xxxx in xxxx GDP x Percentage xxxxxx in xxxxxxxx - xxxxxxx growth xxxx of xxxx year xxxxx mean xxxx bln xxxxx change xx negative xxxxxxx means xxxxx would xxxxxxxx to xxxx bln xx the xxxxxxxx would xx M x V x x x where x x x bln xxx V xxxxxxxxx M xxx This xx a xxxxxxxx change xx -More Articles From Economics
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