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money and banking homework questions use the table below to solve the three questions l. 2. 3. If velocity and aggregate output remain constant at

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money and banking homework questions

use the table below to solve the three questions

image text in transcribed

l. 2. 3. If velocity and aggregate output remain constant at 5 and $1,000 billion, respectively, what happens to the price level if the money supply declines from $400 billion to $300 billion? What happens to nominal GDP if the money supply grows by 20% but velocity declines by 30%? suppose the liquidity preference function is given by = IOOOi Use the money demand equation along with the following table of values, to calculate the velocity for each period. Interest rate Y (in billions) Interest Rate Period 1 0.05 Period 1 12,000 0.05 Period 2 0.07 Period 2 12,500 0.07 Period 3 0.03 Period 3 12,250 0.03 Period 4 0.05 Period 4 12,500 0.05 Period 5 0.07 Period 5 12,800 0.07 Period 6 0.04 Period 6 13,000 0.04 Period 7 0.06 Period 7 13,200 0.06

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