Assume there is only one good in the economy, corn. The economy has enough labor, capital, and land to produce 2000 bushels of corn. V is constant. In 2020, money supply was $3,600 and the price of corn was $9/bushel. For 2021, the Fed increases MS by 10%. a) Compute the 2021 values of nominal GDP and P. Compute the inflation rate for 2020–2021. b) Suppose technological progress causes Y to increase to 2250 in 2020. Compute the 2020-2021 inflation rate.

Assume there is only one good in the economy, corn. The economy has enough labor, capital, and land to produce 2000 bushels of corn. V is constant. In 2020, money supply was $3,600 and the price of corn was $9/bushel. For 2021, the Fed increases MS by 10%. a) Compute the 2021 values of nominal GDP and P. Compute the inflation rate for 2020–2021. b) Suppose technological progress causes Y to increase to 2250 in 2020. Compute the 2020-2021 inflation rate.

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter13: Inflation

Section: Chapter Questions

Problem 14SQ

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