If velocity were constant at 2 while M2 rose from $5 trillion to $7 trillion in a single year, what would happen to nominal GDP?Instructions: Enter your responses rounded to two decimal places.Nominal GDP would rise by [percent.If real GDP rose 3 percent, what would be the level of inflation?Inflation would equal [percent.

A measure of an economy's overall output of goods and services generated over a certain time period…

Answered: If velocity were constant at 2 while M2…

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

Chapter16: Monetary Policy

Section: Chapter Questions

Problem 1SQP

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For the next two questions, consider an economy that has the following information: Its money supply is $2000, growing at a rate of 3 percent annually. The average dollar in this economy is spent 5 times per year. The price level is $2.5; inflation is 2 percent per year. We assume that velocity (income velocity of money) is constant. Calculate this economy's real output. Enter only numbers and a decimal point in your answer as needed. Round your answer to two decimal places as necessary.
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Suppose an economy has a price index at 19, real GDP of $11.83 trillion, and a money supply (M2) of $21.79 trillion. What is the M2 velocity of money for this economy? Round this to two digits after the decimal.
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