Zoom Add Page 1. 1.Define the following in the following variables in the equation of exchange or quantity equation which states : 2. (M x V) = GDP = (Y x PL) (use a concise phrase to define each) a. M is an abbreviation for the size of nation's Money Supply Money Supply is defined as the total quantity of money held by all households, all firms and all governments in the economy b. V is an abbreviation for the income Velocity of money income Velocity of money is defined as C. GDP is an abbreviation for Gross Domestic Product GDP is defined as d. Q or Y is an abbreviation for real aggregate output Real aggregate output is defined e. PL is an abbreviation for the Price Level Price Level is defined as f. Inflation rate is Inflation rate is defined as the g. Deflation rate is Deflation rate is defined as the h. The following is the equation of exchange is rewritten terms of % changes, M Y + PL = %4 i. Determine the inflation rate, if the Money supply increases by 8% annually and V and Y stay the same j. Determine the deflation rate, if the Money supply decreases 8% annually and V and Y stay the same 2. Assume a basket of products costs $5 million in the base year: and the following is true in 2020. (the same basket of products costs $9 million in 2020; GDP2020 = $18 trillion/yr.; Money Wages2020 or W2020 = $108,000/yr.; the price of gas2018 = $3.60/gallon; and the Money supply2020 = $5.4 trillion). Now determine the following (a-f) and explain the number a. price 1.8 or 180 This number means that dollar prices of products are in general 80% higher in 2020 than they were in the base year note: the price index is calculated and the number is explained for you. Do the same for b through f b. real GDP 2020 = This number means the size of GDP if inflation did not exist. Or simply GDP adjusted for the inflation that is occurring This number means c. real wages2020 or w2020 =