2.2 Consider the following thought experiment: (16 marks total) If you live in a country with only one product, so that the entire GDP consists of sales of that one product, the price of that product could be calculated by simply taking the total GDP divided by the number of units sold during the year. a. If your country had a GDP of $100,000,000 last year and sales of your single output were 275,000 units, what would be your average price per unit? (2 marks) b. If the money supply last year was $25,000,000, what was the velocity of money in the national economy? (2 marks) c. Projecting to next year, assume that the velocity of money stays the same, that the government of your country plans to raise the money supply by 20%, and that the number of units increases by 10%. Based on these assumptions calculate the following: i. the number of units that will be sold ii. the expected GDP given the expected money supply increase iii. the implied price per unit next year iv. the implied rate of inflation as a result (2 marks) (2 marks) (2 marks) (2 marks) v. the maximum amount the money supply could increase to maintain the government's 2% targeted inflation rate (4 marks) a. What is the current exchange rate between the Canadian dollar and the US dollar? You may use your number from the table in the previous question. (2 marks) b. XE.com allows you to see current exchange rates for gold ounces (type "gold" into the From or To box). (4 marks) i. What is one ounce of gold worth in Canadian dollars? ii. What is one ounce of gold worth in US dollars? iii. What does the price of gold imply is the exchange rate between Canadian dollars and US dollars? iv. Is your answer to iii the same as your answer to i? c. If you saw that the US dollar price of gold was one dollar less than the price you quoted in b.ii., how could you use that information to make an arbitrage profit? Note: To get full marks, you have to show a full "round turn" (start and end with the same currency to show the amount of your profit). (4 marks)