If the money supply is growing at a rate of 10 percent per year, real GDP (real output) is growing at a rate of 0 percent per year, and velocity is constant,what will the inflation rate be?%. (Enter your response as an integer value.)If the money supply is growing at a rate of 10 percent per year, real GDP (real output) is growing at a rate of 0 percent per year, and velocity is growing at2 percent per year instead of remaining constant, what will the inflation rate be?%. (Enter your response as an integer value.)

Inflation refers to the continuous rise in the prices of goods and services in an economy over a…

Answered: If the money supply is growing at a…

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter22: Money Growth And Inflation

Section: Chapter Questions

Problem 3PA

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Consider again the economy with a total money supply of $2 million and nominal GDP of $6 million. In this economy, the money supply is growing at a rate of 3 percent per year, prices are falling at a rate of 1 percent, and velocity is constant. This economy's real output is growing at a rate of _________ percent. (Enter your answer "as a percent, but without a percentage sign." In other words, if you think output is growing at a rate of 99.99%, enter only 99.99 in the blank. Use a positive sign to indicate an increase and a negative sign to indicate a decrease.)
Assuming that the aggregate supply in a given economy increases by 7.5 percent, whereas the velocity of circulation of money is fixed. If the targeted rate of inflation in the economy is 9.8, estimate what should be the percentage money supply, given that inflation is only a monetary phenomenon.
Consider again the economy with a total money supply of $2 million and nominal GDP of $6 million. In this economy, the money supply is growing at a rate of 3 percent per year, prices are falling at a rate of 1 percent, and velocity is constant. This economy's real output is growing at a rate of _________ percent.
Consider a situation where the central bank increases the money supply. All other things being equal, if nominal GDP increased by $800 billion during a time when velocity was 4, by how much did the central bank increase the money supply? $200 million $400 million $400 billion $200 billion
Suppose that velocity of money is constant, the expected inflation rate is always equal to the actual inflation rate, and the expected real interest rate is 3%. Answer the following questions. Justify your answers. a)Let the growth rate of the money supply rise to 10% without affecting the growth rate of real GDP or velocity. What happens to the inflation rate? If this new inflation rate becomes the expected inflation rate what happens to the nominal interest rate? b)Has the increase in the growth rate of money supply been generated by an open market operation conducted by the central bank? If so, how did the central bank generate this increase in the money supply? Only a qualitative answer is required.
For the purpose of this exercise, assume that velocity is stable. If the Fed wants to keep inflation growing at about 2%, and the economy grew at about 6% during Q1 of 2021, then what would the growth in the money supply need to be in order for the Fed to hit its inflation target? And what does the substantially higher rate of money growth say about the likelihood of future inflation?
Given that velocity is 4, real GDP is 8, and the price level is 2. Suppose that the Central Bank decides to increase nominal money supply to 6 while velocity remains unchanged, calculate the percentage change in nominal GDP.
Consider the following scenario: a. In Argentina, the central bank needs to determine by how much to increase the money supply next year. Suppose they estimate an increase in the overall economic activity (real GDP) of 2.5% percent and have a target inflation rate of 4%. The velocity of money has been observed to be constant over the past many years. By what level should the central bank change the money supply to achieve its inflation target? b. Next year, the central bank of Argentina wishes to reduce inflation to 2 percent, and estimates an increase in real GDP by 1.5 percent. What should be the change in the money supply? c. What is an "inflation tax", and how might it explain the creation of inflation by a central bank?
If the COVID-19 recovery continues and inflation starts to rise, what effect would a decision by the Fed to not change the federal funds rate target range have on the U.S. economy? If the Fed decides to leave the federal funds rate target range unchanged, we would expect _______. A. deflation to occur and the unemployment rate to increase B. the recessionary gap to increase C. potential GDP to increase and the full-employment quantity of labor to increase D. inflation to increase and the unemployment rate to decrease Thanks!
Assume that the money demand function is (M / P)d = 2,200 – 200r, where r is the interest rate in percent. If the price level is fixed at P=2, and the Fed wants to fix the interest rate at 7 percent, it should set the money supply at: a. 2,000. b. 1,800. c. 1,600. d. 1,400.
If the money supply increases by 7%, the price level by 2%, and the real output by 6%, then according to the equation of the quantitative theory of money, the velocity of money increases by:

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