The money supply in Economia is $200 billion. Nominal GDP is $800 billion and real GDP is $400 billion. The central bank of Economia wants the inflation rate to be 1 percent. Assume that velocity increases by 2 percent this year. If real GDP grows by 8 percent this year, how will the central bank of Economia change the money supply this year? A) It will increase the money supply by 7 percent. B) It will increase the money supply by 9 percent. OC) It will increase the money supply by 8 percent. D) It will not change the money supply.

The money supply in Economia is $200 billion. Nominal GDP is $800 billion and real GDP is $400 billion. The central bank of Economia wants the inflation rate to be 1 percent. Assume that velocity increases by 2 percent this year. If real GDP grows by 8 percent this year, how will the central bank of Economia change the money supply this year? A) It will increase the money supply by 7 percent. B) It will increase the money supply by 9 percent. OC) It will increase the money supply by 8 percent. D) It will not change the money supply.

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 1PA

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