a.Suppose that in an economy, this year's money supply is $2 million, nominal GDP is $12 million, and real GDP is $10 million.

i.Compute the velocity of money.

ii.Suppose that velocity is constant and the economy's real output of goods and services is expected to grow by 4 percent next year due to technical progress. What is the price level next year if the central bank keeps the money supply constant?

b.Give the three approaches that the central bank can use to adjust interest rate.