The data below are from the economies of Ishgandar and Nonburmia. Ishgandar Nonburmia Year Population GDPGDP Deflator Nominal GDPGDP Year Population GDPGDP Deflator Nominal GDPGDP 1 5 100 $200 1 10 100 $300 2 5 125 $375 2 10 110 $440 (b) If Ishgandar and Nonburmia have the same velocity of money in Year 22, which economy must have the higher money supply in Year 22 ? Explain.

The data below are from the economies of Ishgandar and Nonburmia. Ishgandar Nonburmia Year Population GDPGDP Deflator Nominal GDPGDP Year Population GDPGDP Deflator Nominal GDPGDP 1 5 100 $200 1 10 100 $300 2 5 125 $375 2 10 110 $440 (b) If Ishgandar and Nonburmia have the same velocity of money in Year 22, which economy must have the higher money supply in Year 22 ? Explain.

Economics Today and Tomorrow, Student Edition

1st Edition

ISBN:9780078747663

Author:McGraw-Hill

Publisher:McGraw-Hill

Chapter17: Stabilizing The National Economy

Section17.3: Monetarism And The Economy

Problem 2R

See similar textbooks

Similar questions

List the three traditional tools that a central bank has for controlling the money supply.
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? (Use this information as necessary to answer the following 4 questions.)
Money demand equation for a country is given by the equation (MP)d=e−λ(πe+r)+αY where πe is expected inflation, r is the real interest rate and Y is income. We assume that expected inflation equals actual inflation and also r and Y are considered as constant. Find the optimal level of inflation (π∗)which maximizes seigniorage revenue (S) ?
If nominal GDP in an economy is $1500 and the money supply is $500, what is the velocity of money? a. 333 b. 5 c. 3 d. 7500
Consider an economy in which the demand for money is of the formMt =1/(bar over v)PtYfor t = 0, 1, 2, · · · , where output is 150, the money velocity is 1.5. The money supplyis 100 for t = 0, 1. In period 2, the central bank surprises people and announcethat money supply will grow at 2 percent forever, that is, M0 = 100, M1 = 100,M2 = (1.02)M1, M3 = (1.02)M2, and so on. 1. What is the inflation rate in period 1, π1? What is real money balance in period 1, M1/P1 ? What is the expected inflation in period 2, given the informationavailable in period 1, E1π2? 2. What is the inflation rate in period 2, π2? What is real money balance inperiod 2, M2/P2 ? What is expected inflation in period 3, given the informationavailable in period 2, E2π3? 3. What is the inflation rate in period 3, π3? What is real money balance inperiod 2, M3/P3?
The U.S. Federal Reserve responded to the 2020 COVID-19 lockdowns by implementing an expansionary monetary policy, causing M2 money supply to rise from $15.3trillion in December 2019 to $18.3 trillion in July 2020. Over the same period, real GDP fell by 5.1 percent. a) Assuming that the velocity of money was constant over this period, what should the inflation rate be, based on the quantity equation? Show your work
the money supply of Freedonia this year is $150 billion nominal GDP is $750 billion .assuming that velocity of money is stable. real GDP gross 2%this year. and money supply does not change what are the velocity, price level, and inflation rate
Consider an economy in which the demand for money is of the formMt =(1/v) PtY for t = 0, 1, 2, · · · , where output is 150, the money velocity is 1.5. The money supplyis 100 for t = 0, 1. In period 2, the central bank surprises people and announcethat money supply will grow at 2 percent forever, that is, M0 = 100, M1 = 100,M2 = (1.02)M1, M3 = (1.02)M2, and so on. Now, consider an economy in which the demand for money is of the formY / (1 + it)for t = 0, 1, 2, · · · , where output is 150 and it denotes the nominal interest rate inperiod t. The real interest rate, denoted r, is constant and equal to 4%. In period0 and 1, the money supply is 100 and people expect that money supply wouldbe 100 forever. People have rational expectations. In period 2, the central banksurprises people and sets the money supply will grow at 2 percent forever, that is,M0 = 100, M1 = 100, M2 = (1.02)M1, M3 = (1.02)M2, and so on. 9. Why are the inflation rate in period 2 from question 1 and question…
Consider an economy in which the demand for money is of the formMt =(1/v) PtYfor t = 0, 1, 2, · · · , where output is 150, the money velocity is 1.5. The money supplyis 100 for t = 0, 1. In period 2, the central bank surprises people and announcethat money supply will grow at 2 percent forever, that is, M0 = 100, M1 = 100,M2 = (1.02)M1, M3 = (1.02)M2, and so on a. What is the inflation rate in period 1, π1? What is real money balance in period 1, M1 / P1? What is the expected inflation in period 2, given the informationavailable in period 1, E1π2? b. What is the inflation rate in period 2, π2? What is real money balance inperiod 2, M2/P2? What is expected inflation in period 3, given the informationavailable in period 2, E2π3? c. 4. Compare E1π2 and π2.
The U.S. Federal Reserve responded to the 2020 COVID-19 lockdowns by implementing an expansionary monetary policy, causing the M2 money supply to rise from$15.3trillion in December 2019 to$18.3 trillion in July 2020. Over the same period, real GDP fell by 5.1 percent. (a) Assuming that the velocity of money was constant over this period, what should the inflation rate be, based on the quantity equation? Show your work. (b) Why would you not expect inflation to be immediate, following the Fed’s monetary expansion?
Q. The equation for the velocity of money is defined as: a. MV=PR b. MV=PT c. MV=MV d. MV=PY e. None of the above. Kindly just mark the correct option please
Over the last 10 years the Federal Reserve has substantially changed the way itoperates. What is different about how the Federal Reserve now conducts policy? a) It is more secretive about interest rate and other policy changes b) it gives the public forward guidance on what it will do c) it places fewer regulations on commercial banks d) it discuesses its policy in public and asks for guidance from Congress