(c) Briefly explain the quantity theory of money and how it is related to inflation.

Topic: Quantity theory of money. Answer 1, 2 and 3. What will happen to nominal GDP if, instead, the money supply decreases by 8 percent and velocity does not change? What will happen to nominal GDP if, instead, the money supply increases by 5 percent and velocity decreases by 5 percent? What happens to the price level in the short run in each of these three situations?

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(b) List one assumption of the quantity theory of money. Based on the simple quantity theory of money, what would be the impact on the economy of increasing the money supply by 5%?

1.Explain the quantity theory Answer the following questions: of money. Make sure to explain the relationship between money demand, money supply, and quantity of money.

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5,If the central bank sells government securities from the private sector-money markets, other things being equal, what would the effect be on the following? a) Economic activity and inflation

What is the effect of inflation on the real value of money? a. Decrease b. Not related c. No effect d. Increase

3. Explain any three costs associated with inflation? Also, provide a real-world example of hyperinflation that happened in the past.

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