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What is the level of aggregate nominal spending

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Suppose residents of the imaginary land of Angria use rubies as money. Every ruby is used, on an average, 7 times per year to carry out transactions. The total supply of rubies is fifty million.

a) What is the level of aggregate nominal spending in Angria according to the quantity theory of money?

b) Suppose now that the residents of Angria use less money to conduct same number of transactions (i.e. each individual carries fewer rubies). What is the effect on the velocity of money (ruby here)?

c) Suppose a new financial product named "bonds" introduced in economy of Angria. How the introduction of this new financial product will affect the willingness to hold rubies (money) and consequently the velocity of rubies (money).

Reference no: EM132501283

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