What happens to velocity if the average price level falls

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Reference no: EM1313952

Q1. Suppose the U.S. dollar price of a British pound is $1.50; the dollar price of a euro is $.90; a hotel room in London, England, cost 120 British pounds; also a comparable hotel room in Hanover, Germany, cost 220 euro.
a. Which hotel room is cheaper to a U.S. tourist?

Q2. Calculate the velocity of money if real GDP is 3,000 units, the average price level is $4 per unit also the quantity of money I the economy is $1,500. Illustrate what happens to velocity if the average price level drops to $3 per unit? Illustrate what happens to velocity if the average price level remains at $4 per unit but the money delivery rises to $2,000? Illustrate what happens to velocity if the average price level falls to $2 per unit, the money delivery is $2000 also real GDP is 4,000 units?

Reference no: EM1313952

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