econ

1. Us the quantity theory of money, suppose that this year's money supply is $503, nominal GDP is $1T, and real GDP is $5003. a. What is the price level? What is the velocity of money? b. Suppose that the velocity is constant and the economy's output of goods and services rises by 5% each year. What will happen to nominal GDP and the price level next year if the Bank of Canada keeps the money supply constant? c. What money supply should the Bank of Canada set next year if it wants to keep the price level stable? cl. What money supply should the Bank of Canada set next year if it wants inflation of 10%? 2. Suppose that a country's inflation rate increases sharply. What happens to the inflation tax on the holders of money? Why is wealth that is held in savings accounts not subject to a change in the inflation tax? Can you think of any way in which holders of savings accounts are hurt by the increase in the inflation rate