If the money supply is growing at a rate of 3 percent per year, real GDP (real output) is growing at a rate of 1 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 3 percent per year, real GDP (real output) is growing at a rate of 1 percent per year, and velocity is growing at 1 percent per year instead of remaining constant, what will the inflation rate be? %. (Enter your response as an integer value.)

If the money supply is growing at a rate of 3 percent per year, real GDP (real output) is growing at a rate of 1 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 3 percent per year, real GDP (real output) is growing at a rate of 1 percent per year, and velocity is growing at 1 percent per year instead of remaining constant, what will the inflation rate be? %. (Enter your response as an integer value.)

Macroeconomics: Principles and Policy (MindTap Course List)

13th Edition

ISBN:9781305280601

Author:William J. Baumol, Alan S. Blinder

Publisher:William J. Baumol, Alan S. Blinder

Chapter15: The Debate Over Monetary And Fiscal Policy

Section: Chapter Questions

Problem 2TY

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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. (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.)
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.
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?
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
Explain why this following statement is true or false? a) Decreasing inflation rate and increasing purchasing power are caused by too many amount of money in circulation.
It is sometimes suggested that the Federal Reserve should try to achieve zero inflation. If we assume that velocity is constant, does this zero-inflation goal require that the rate of money growth equal zero? If yes, explain why. If no, explain what the rate of money growth should equal
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:
Calculate the Federal Funds rate for the following values of expected growth in real GDP and inflation. Assume that, as above, long-term real GDP growth is 3% and steady-state (or target) inflation is 2%. 1. Expected growth in real GDP = 5%; inflation = 5% 2. Expected growth in real GDP = 1%; inflation = 0% 3. Expected growth in real GDP = 3%; inflation = 2%
All other things being equal, by how much will nominal GDP expand if the central bank increases the money supply by $100 billion, and the velocity of money is 3? Suppose now that economists expect the velocity of money to increase by 50% as a result of the monetary stimulus. What will be the total increase in nominal GDP? If GDP is 1,500 and the money supply is 400, what is velocity? If GDP now rises to 1,600, but the money supply does not change, how has velocity changed? If GDP now falls back to 1,500 and the money supply falls to 350, what is velocity?
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.
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.