Suppose that this year's money supply is $400 billion, nominal GDP is $12 trillion, and real GDP is $4 trillion.

The price level is , and the velocity of money is .

Suppose that velocity is constant and the economy's output of goods and services rises by 3 percent each year. Use this information to answer the questions that follow.

If the Fed keeps the money supply constant, the price level will fall by 3%, rise by 3%, or stay the same , and nominal GDP will rise 9%, fall 9%, fall 3% , rise 3%, or stay the same .

True or False: If the Fed wants to keep the price level stable instead, it should keep the money supply unchanged next year.

True

False

If the Fed wants an inflation rate of 9 percent instead, it should decrease or increase the money supply by %