Please help on Part C and D. In Econland, current money supply is 1,000, the price level is 3, and realoutput is 600. Real GDP grows by 2.5 percent per year, the money supplygrows by 5 percent per year. The velocity of money is constant.a. Find the velocity of money.b. Suppose the velocity of money is constant. Use the quantity theory ofmoney to find the inflation rate. What happens to inflation if money growthrate increases?c. By how much does nominal GDP grow per year?d. Suppose, instead of a constant velocity of money, the velocity of moneyin Econland grows steadily at 1% per year because of financial innovation.Use the quantity theory of money to find inflation. What is inflation if thevelocity of money grows at 2% per year? Are the velocity of money andinflation positively or negatively related? How should the central bankchange the money supply growth to compensate for the growth in velocityto keep inflation at the level in (b)?

Quantity theory of money says that there is positive and proportional relationship between quantity…

In Econland, current money supply is 1,000, the price level is 3, and real output is 600. Real GDP grows by 2.5 percent per year, the money supply grows by 5 percent per year. The velocity of money is constant. a. Find the velocity of money. b. Suppose the velocity of money is constant. Use the quantity theory of money to find the inflation rate. What happens to inflation if money growth

In Econland, current money supply is 1,000, the price level is 3, and real output is 600. Real GDP grows by 2.5 percent per year, the money supply grows by 5 percent per year. The velocity of money is constant. a. Find the velocity of money. b. Suppose the velocity of money is constant. Use the quantity theory of money to find the inflation rate. What happens to inflation if money growth

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter15: Monetary Theory And Policy

Section: Chapter Questions

Problem 3.7P

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