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Appropriate money supply to meet target

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Reference no: EM131714034

Given:

Money supply = $295 billion

Velocity of money = 25

Real GDP = $575 billion

1. Solve for the price level.

2. Solve for the nominal GDP.

3. Let real GDP be $650 billion, holding the velocity of money constant. 

1 Solve for the new price level.

2 Solve for the new level of nominal GDP

3 The Fed wants to target a 3 percent inflation rate for the following year. Solve for the appropriate money supply to meet this target inflation rate.

Reference no: EM131714034

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