Question
(a) Suppose that this year's money supply is RM30,000, real GDP is RM2,000 and velocity is 5. (i) Find the price level. (ii) Find the
(a) Suppose that this year's money supply is RM30,000, real GDP is RM2,000 and velocity is 5. (i) Find the price level.
(ii) Find the nominal GDP.
(iii) If the money supply increases by 10 percent, find the new price level assuming that velocity and real GDP are constant.
(iv) Suppose money supply and velocity are constant. State what will happen to nominal GDP and the price level if real GDP rises by 5 percent.
(v) According to principle of monetary neutrality, money does not affect output. List FOUR factors that may affect economy's output of goods and services.
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