Please answer the bolded section c : 1-5

2.2 Consider the following thought experiment: (16 marks total)

If you live in a country with only one product, so that the entire GDP consisted of sales of that one product, the price of that product could be calculated by simply taking the total GDP divided by the number of units sold during the year.

a. If your country had a GDP of $100,000,000 last year and sales of your single output was 275,000 units, what would be your average price per unit? (2 marks)

b. If the money supply last year was $25,000,000, what was the velocity of money in the national economy? (2 marks)

c. Projecting to next year, assume that the velocity of money stays the same, that the government of your country plans to raise the money supply by 20%, and that the number of units increases by 10%. Based on these assumptions calculate the following:

i. the number of units that will be sold (2 marks)

ii. the expected GDP given the expected money supply increase (2 marks)

iii. the implied price per unit next year (2 marks)

iv. the implied rate of inflation as a result (2 marks)

v. the maximum amount the money supply could increase to maintain the government's 2% targeted inflation rate (4 marks)