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What is the price level-what is the velocity of money

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You are a monetarist given the following information. Suppose that this year's money supply in country X is $500 billion, nominal GDP is $10 trillion, and real GDP is $5 trillion.

-What is the price level? What is the velocity of money?

-Suppose that velocity is constant and the economy's output of goods and services rises by 5 percent each year. What will happen to nominal GDP and the price level next year if the central bank keeps the money supply constant?

-What money supply should the central bank set next year if it wants to keep the price level stable?

-What money supply should the central bank set next year if it wants an inflation of 10 percent?

-What is the difference between the equation of exchange and the quantity theory of money?

-According to the quantity theory of money, what should the central bank do to lower inflation?

-What three assumptions turn the equation of exchange into the quantity theory of money?

Reference no: EM132593441

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