Reference no: EM131650718

Discussion Question 1:

Explain the extent to which you agree or disagree with the following statements.

1. Although I can convert it into money, my deposit at my local bank is not money.
2. Credit cards are money because I purchase merchandise with them.
3. Debit cards is just like money.

Discussion Question 2:

(a) Read up on the Quantity Theory of Money and explain what it says in a few sentences.

(b) Suppose Smithsonia is a country in which the quantity theory of money operates. It has a constant population, capital stock, and technology so real GDP does not change. In 2015, real GDP was $475 million, the price level, measured by the GDP deflator, was 140 and the velocity of circulation of money was 8. (Because the price level is measured by the GDP deflator, it must be divided by 100 before it is used in the equation of exchange.) In 2016, the quantity of money increased by 23 percent. Using the Quantity Theory of Money equation, calculate the following:

1. What was the quantity of money in 2015?
2. What was the velocity of circulation in 2016?
3. What was the price level in 2016?