A country’s money supply equals 200 bln USD, nominal GDP equals 600 bln USD and real GDP – 500 bln USD in 2018.

A. Quantify the price level and the velocity of money.

B. Assume real GDP increases by 5% next year. Determine what money supply should the central bank of this country set next year in order to keep the prices stable (assume velocity of money does not change).

C. Discuss what can happen if the growth of a country's money supply is faster than the growth of its real output. Use quantity theory of money to support your statement.

Masters Consulting had the following selected transactions in July: i (Click the icon to view the transactions.) Requirements 1. Show how each transaction would be handled (in terms of recognizing revenues and expenses) using the cash basis and the accrual basis. 2. Compute July income (loss) before tax under each accounting method. 3. Indicate which measure of net income or net loss is preferable. Use the transactions on July 11 and July 24 to explain. Requirement 1. Show how each transaction would be handled using the cash basis and the accrual basis. Under each column, give the amount of revenue or expense for July using the cash basis and the accrual basis. (Enter "0" for any transactions that do not affect revenues or expenses. Use parentheses or a minus sign when entering expenses or losses. Round your answers to the nearest whole dollar.) July Date 4 5 8 11 19 24 26 29 31 31 Amount of Revenue (Expense) for July Cash Basis Revenue or (Expense) -2400 -5000 1500 -500 0 0 2800 -1900 -1200 0 0 Accrual Basis Revenue or (Expense) -2400 -5000 1500 -500 2800 -1900 0 0 -1200 900 900 29 31 31 31 -1200 0 0 -1200 900 900 Requirement 2. Compute July income (loss) before tax under each accounting method. Income (loss) before tax Requirement 3. Indicate which measure of net income or net loss is preferable. Use the transactions on July 11 and July 24 to explain. measure of net income. s preferable because it accounts for revenues and expenses when they For example, on July 11, the company $2,800 of revenue and increased its wealth as a result. The On July 24, the business collected the receivable that was created by the revenue earned on account at July 11. The basis waits until cash is received, on July 24, to record the revenue. This is Y The Enter any number in the edit fields and then continue to the next question. , not when they basis records this revenue, but the basis ignores it. basis records no revenue on July 24 because the company's increase in wealth occurred back on July 11. The July 1 Prepaid insurance for July through September, $2,400. 4 Purchased office furniture for cash, $5,000. 5 Performed services and received cash, $1,500. Paid advertising expense, $500. 8 Performed service on account, $2,800. 11 19 24 26 29 31 31 31 Purchased computer on account, $1,900. Collected for July 11 service. Paid account payable from July 19. Paid salary expense, $1,200. Adjusted for July insurance expense (see July 1). Earned revenue of $900 that was collected in advance back in June. Recorded July depreciation expense on all fixed assets, $360.