Suppose that initially the money supply is $1 trillion, the price level equals 3, the real GDP is $5 trillion inbase-year dollars, and income velocity of money is 15. Then the money supply increases by $100 billion, while real GDP and income velocity of money remain unchanged.

a. According to the quantity theory of money and prices, calculate the new price level after the increase in moneysupply:

New price level = $3.30

b. Calculate the percentage increase in moneysupply: