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7. The key endogenous variable in the quantity theory of money (QTM) is the price Suppose you are the head of the central bank and
7. The key endogenous variable in the quantity theory of money (QTM) is the price Suppose you are the head of the central bank and your mandate is to mainta price level at a constant value. Use the QTM to explain what you would do money supply in response to each of the following events: (a) Real GDP increases by 6% during a boom. (b) Real GDP declines by 1% during a recession. (c) Real GDP is growing at 5% per year. (d) The velocity of money increases by 1%. (e) The velocity of money declines by 1% while real GDP increases by 5% same time
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