1 Assume that this year's money supply is US$500 billion, nominal GDP is US$10 trillion, and real GDP is US$5 trillion. a. What is the price level? What is the velocity of money? b. Assume that the velocity of money is constant and real GDP grows at 5% per year. If the central bank lets the goods If the currency supply remains unchanged, how will nominal GDP and price levels change next year? c. If the central bank wants to maintain price stability, how should it let the money supply change? d. If the central bank wants price inflation to be 10%, how should it let the money supply change? Assume that credit cards become more popular, so people need to hold
1 Assume that this year's money supply is US$500 billion, nominal GDP is US$10 trillion, and real GDP is US$5 trillion. a. What is the price level? What is the velocity of money? b. Assume that the velocity of money is constant and real GDP grows at 5% per year. If the central bank lets the goods If the currency supply remains unchanged, how will nominal GDP and price levels change next year? c. If the central bank wants to maintain price stability, how should it let the money supply change? d. If the central bank wants price inflation to be 10%, how should it let the money supply change? Assume that credit cards become more popular, so people need to hold
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter22: Money Growth And Inflation
Section: Chapter Questions
Problem 1PA
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I would like to ask how to calculate c and d
Transcribed Image Text:1 Assume that this year's money supply is US$500 billion, nominal GDP is US$10 trillion,
and real GDP is US$5 trillion.
a. What is the price level? What is the velocity of money?
b. Assume that the velocity of money is constant and real GDP grows at 5% per year. If
the central bank lets the goods
If the currency supply remains unchanged, how will nominal GDP and price levels
change next year?
c. If the central bank wants to maintain price stability, how should it let the money
supply change?
d. If the central bank wants price inflation to be 10%, how should it let the money supply
change?
Assume that credit cards become more popular, so people need to hold
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