What level of money supply should the central bank set

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Suppose that an economy's money supply is $1688 billion, and its real GDP is $12973 billion, and its nominal GDP is $14242 billion. a) Solve for the index for the general price level in this economy. -Is this how you do it: GDP Deflator = Nominal/Real * 100 = 1.097 b) Calculate the velocity for the money (V) for this economy. -Is this how you do it: Price Index * Real GDP / Money Supply = 843.78 c) Suppose that the velocity is constant and the output rises by 2% per year. What will happen to the nominal GDP and the price level next year if the central bank keeps the price level stable? d) What level of money supply should the central bank set next year if it wants to keep the price level stable? e) What level of money supply should the central bank set next year if it wants an inflation rate of 4%? f) What growth rate should the central bank set for the money supply if they want inflation to be steady at 2% per year?

Reference no: EM13147902

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