Question
5. Velocity and the quantity equation Consider a simple economy that produces only pies. The following table contains information on the economy's money supply, velocity
5. Velocity and the quantity equation
Consider a simple economy that produces only pies. The following table contains information on the economy's money supply, velocity of money, price level, and output. For example, in 2019, the money supply was $360, the price of a pie was $9.00, and the economy produced 800 pies.
Fill in the missing values in the following table, selecting the answers closest to the values you calculate.
Year Quantity of Money Velocity of Money Price Level Quantity of Output Nominal GDP
2019 360 ____ 9.00 800 ______
2020 378 20 _____ 800 _______
The money supply grew at a rate of______(1.13, 2.44, 5, 105) from 2019 to 2020. Since pie output did not change from 2019 to 2020 and the velocity of money_______ (increase, decrease or remained the same) , the change in the money supply was reflected( entirely, or partially) in changes in the price level. The inflation rate from 2019 to 2020 was_______ 1.13, 2.44,5, 105) .
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