8. Suppose price levels were falling 10% per day. How would this affect the demand for money? How would it affect velocity? What can you conclude about the role of velocity during periods of a rapid price change?

13. The text notes that a 10% increase in the money supply may not increase the price level by 10% in the short run. Explain why

1. Here are annual values for M2 and for nominal GDP (all figures are in billions of dollars) for the mid-1990s. Year, M2, Nominal GDP, 1993 3,482.0 $6,657.4 1994 3,498.1 7,072.2 1995 3,642.1 7,397.7 1996 3,820.5 7,816.9 1997 4,034.1 8,304.3

a. Compute the velocity for each year

b. Compute the fraction of nominal GDP that was being held as money.

c. What is your conclusion about the stability of velocity in this five-year period?