Suppose that the level of nominal GDP in Estilvania is $30 billion and the level of the
Question:
Suppose that the level of nominal GDP in Estilvania is $30 billion and the level of the money supply is
$10 billion.
a. What is the velocity of money in Estilvania?
b. Suppose that the money supply increases to $15 billion and nominal GDP rises to $45 billion.
What has happened to velocity?
c. Suppose that the money supply increases to $15 billion and nominal GDP rises to $40 billion.
What has happened to velocity?
d. Suppose that the money supply decreases to $8 billion and, as a result, both the price level and real GDP fall, leading to a decrease in nominal GDP to $26 billion. What has happened to velocity?
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Related Book For 
Principles Of Economics In Context
ISBN: 9780765638823
1st Edition
Authors: Neva Goodwin, Jonathan M. Harris, Julie A. Nelson, Brian Roach, Mariano Torras
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