Question
What basic assumption about the velocity of money transforms the equation of exchange into the quantity theory of money? Also: a.According to the quantity theory,
What basic assumption about the velocity of money transforms the equation of exchange into the quantity theory of money? Also:
a.According to the quantity theory, what will happen to nominal GDP if the money supply increases by 5 percent and velocity does not change?
b.What will happen to nominal GDP if, instead, the money supply decreases by 8 percent and velocity does not change?
c.What will happen to nominal GDP if, instead, the money supply increases by 5 percent and velocity decreases by 5 percent?
d.What happens to the price level in the short run in each of these three situations?
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