Suppose the supply of money, measured by M1, is $3.0 trillion, output, measured by real GDP, is $18.7 trillion, and the velocity of money is 7.1. Suppose the supply of money increases to $3.7 trillion but GDP and the velocity of money do not change. What is the percent by which prices change? Provide your answer as a percentage rounded to two decimal places. Do not include any symbols, such as "$," "," "%," or "," in your answer. Your Answer:
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- . Based on your knowledge of the Quantity Theory of Money and the Equation of Exchange, answer the following questions. Assume the money supply is $1,200 billion, the velocity of circulation is 8, and the price level is $6. What is the level of real output and nominal output? Assume the money supply is $1,200 billion, the price level is $6, and velocity remains constant. What will happen if the money supply rises by 10%?In the country of Juventus, the money supply is equal to $52 (bilion), the velocity of circulation is 5, and real GDP is $100 (bilion) a. What is the price level in Juventus, and what is the valur of its nominal GDP? Round your price level to 2 decimal places Price level Nominal GDP b. If money supply increases by 20 percent, what will be the new values of the price level and nominal GDP, assuming that Vand real GDP remain constant? Round your price level to 2 decmal olaces Price levet Nominal GDP c What does this suggest about the connection between money supply atnd price level? The relationship between money supply and price level in this case is Cick to select)In the country Constantania, suppose the velocity of money is always the same. Last year, the money supply was $2 billion and real GDP was $5 billion. This year, the money supply increased by 6 percent, real GDP by 4 percent, and nominal GDP is $6.5 billion. a) Calculate the velocity of money and the price levels in the two years, and then calculate the inflation rate. b) Calculate the inflation rate using the formula AM/M + AV/V = AP/P + AY/Y, where the Greek letter A represents a change and the ratio AM/Mx 100 is the percentage change (or the rate of change) in M. Compare this result with the result you obtained in part a. Why could there be some difference? c) What is the difference between commodity money and fiat money? Why do people accept fiat currency in trade for goods and services?
- Suppose the money demand function is ▪ Md/P = 1000+ 0.2Y - 1000 (r + πе). (a) Calculate velocity if Y = 2000, r = .06, and Te = .04. (b) If the money supply (Ms) is 2600, what is the price level? "(c) Now suppose the real interest rate rises to 0.11, but and Ms are unchanged. What happens to velocity, and the price level? So if the hominal interest rate were to rise from 0.10 to 0.15 over the course of a year, with Y remaining at 2000, what would the inflation rate be?Consider an economy with a constant nominal money supply, a constant level of real outout Y= 400, and a constant real interest rate r 10%. Suppose that the income elasticity of money demand is 1.20 and the interest elasticity of money demand is-0.10. a. By what percentage does the equilibrium price level differ from its initial value if output increases to Y 480.00 (and rremaine at 10%)? %AP= (enter your result as a percentage rounded to two decimal places). b. By what percentage does the equilibrium price level differ from its initial value if the real interest increases to r-12.50% (and Y remaina at 400)? %AP (enter your result as a percentage rounded to two decimal placea). c. Suppose that the real interest rate inoreases to re 12.50%. By what percentage would real output have to increase for the equilibrium price level to remain at its initial value? %AY- T(enter your reault an a percentage rounded to two decimal places)Suppose that the economy has the following money supply and demand equations: Money Supply: M = 8000Money Demand: M= 10,000 – 40,000rwhere money is in billions of dollars and interest rates, r , is written as a decimal(e.g., an interest rate of 10% would be written as .1 in the equation).A. Determine the equilibrium interest rate and quantity of money.B. What will happen in the money market if the interest rate is currently 10%?
- Suppose that the economy has the following money supply and demand equations: Money Supply: M = 8000Money Demand: M= 10,000 – 40,000rwhere money is in billions of dollars and interest rates, r , is written as a decimal(e.g., an interest rate of 10% would be written as .1 in the equation).A. Determine the equilibrium interest rate and quantity of money.B. What will happen in the money market if the interest rate is currently 10%?What is the amount of excess supply of or excess demand for money?C. Show in graph that at this interest rate (10%) there is disequilibrium in themoney market.2. Assume that a particular bank has excess reserves of Php800,000 and checkabledeposits of Php1,500,000. If the reserve ratio is 20%, what is the size of the bank’sactual reserves?3. Suppose that GRAB Bank is a newly created bank in your hometown. Consider thefollowing transactions: Owners of the bank sold shares of stocks to the public (which includes owners’equity) amounting to P1,000,000. To fully…2. Money supply, money demand, and adjustment to monetary equilibrium The following table gives the quantity of money demanded at various price levels (P), the money demand schedule. In the following table, fill in the column labeled Value of Money. Quantity of Money Demanded Price Level (P) Value of Money (1/P) (Billions of dollars) 1.00 1.00 1.33 0.75 2.00 0.50 4.00 0.25 1.5 2.0 3.5 7.0 Now consider the relationship between the quantity of money that people demand and the price level. The lower the price level, the less required to complete transactions, and the less money people will want to hold in the form of currency or demand deposits. Assume that the Federal Reserve initially fixes the quantity of money supplied at $3.5 billion. Use the orange line (square symbol) to plot the initial money supply (MS₁) set by the Fed. Then, referring to the previous table, use the blue connected points (circle symbol) to graph the money demand curve. moneyGive typing answer with explanation and conclusion A standard "money demand" function used by macroeconomists has the form ln(m)=β0+β1ln(GDP)+β2R, Where m is the quantity of (real) money, GDP is the value of (real) gross domesticproduct, and R is the value of the nominal interest rate measured in percent per year. Supposed that β1 = 2.66 and β2 = −0.05. A) What is the expected change in m if GDP increases by 4%? The value of m is expected to_________(increase or decrease ) by approximately ________% (Round your response to the nearest integer) B) What is projected to change in m if the interest rate increases form 2% to 6% ? The value of m is expected to ________(increase/decrease) by approximately ________% (Round your response to the nearest integer)
- D7 Suppose that people hold 17 cents out of every dollar of deposits as currency. Suppose that banks hold 13 cents out of every dollar of deposits as excess reserves. If the Fed buys $100 billion worth of Treasury securities on the open market, what is the change in the money supply? Make sure to express your answers in billions. Make sure to round your answers to the nearest 100th decimal points. For example, 24.56 for $24.56 billion.Calculate what happens to nominal GDP if velocityremains constant at 4 and the money supply increasesfrom $250 billion to $375 billionQuestion 13 (1 point) Suppose the supply of money, measured by M1, is $3.0 trillion, output, measured by real GDP, is $18.7 trillion, and the velocity of money is 7.1. Suppose the supply of money increases to $3.7 trillion but GDP and the velocity of money do not change. What is the percent by which prices change? Provide your answer as a percentage rounded to two decimal places. Do not include any symbols, such as "$," "," "%," or "," in your answer. Your Answer: Answer