Mandate is to maintain the price level at constant value

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Suppose you are the head of the central bank and your mandate is to maintain the price level at a constant value. Explain what you would do to the money supply in response to each of the following events:

(a) Real GDP increases by 4% during a boom.

(b) Real GDP declines by 1% during a recession.

(d) The velocity of money increases by 2%.

(e) The velocity of money declines by 1%

Reference no: EM131169399

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