Suppose that the money supply and the nominal GDP for a hypothetical economy are $98 billion and $288 billion, respectively.  

Instructions: Round your answers to 1 decimal place.

a. What is the velocity of money?

    

b. How will households and businesses react if the central bank reduces the money supply by $27 billion?

• Households and businesses will reduce spending.

• Households and businesses will increase spending.

• Households and businesses will not react.

c. By how much will nominal GDP have to fall to restore equilibrium, according to the monetarist perspective?