3. The velocity of money, V, is defined as the ratio of real GNP to real money...
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3. The velocity of money, V, is defined as the ratio of real GNP to real money holdings, V = Y>(M>P) in this chapter’s notation. Use equation (15-4) to derive an expression for velocity and explain how velocity varies with changes in R and in Y. (Hint: The effect of output changes on V depends on the elasticity of aggregate money demand with respect to real output, which economists believe to be less than unity.) What is the relationship between velocity and the exchange rate?
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International Finance Theory And Policy
ISBN: 9781292238739
11th Global Edition
Authors: Paul R. Krugman, Maurice Obstfeld, Marc Melitz
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