Illustrate what percentage increase in the money supply

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Reference no: EM1314916

Q. The One Product economy, which produces also sells only personal computers (PCs), expects which it can sell 500 more, or 12,500 PCs, next yr. Nominal GDP was $20 million this yr also the money supply was $7 million. The central bank for the One Product economy plans to increase the money supply by 10 percent next yr.

a. Illustrate what was the average selling price for the personal computers this yr?

b. Illustrate what is the expected average selling price next yr for personal computers if the velocity of money remains at this yr's turnover rate? Illustrate what percentage change in price level is expected to occur?

c. If the objective is to keep the price level the same next yr (i.e., no inflation), illustrate what percentage increase in the money supply should the central bank plan for?

d. Elucidate how would your answer in (c) change if the velocity of money is expected to be three times next yr? Illustrate what is it now?

Reference no: EM1314916

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