Velocity and the quantity equationConsider a simple economy that produces only pies. The following table contains information on the economy's money supply, velocity of money, price level, and output. For example, in 2017, the money supply was $360, the price of a pie was $9.00, and the economy produced 800 pies.Fill in the missing values in the following table, selecting the answers closest to the values you calculate.YearQuantity of MoneyVelocity of MoneyPrice LevelQuantity of OutputNominal GDP(Dollars)(Dollars)(Pies)(Dollars)2017360 9.00800 201837820 800 The money supply grew at a rate of from 2017 to 2018. Since pie output did not change from 2017 to 2018 and the velocity of money , the change in the money supply was reflected in changes in the price level. The inflation rate from 2017 to 2018 was .

We know that , The formula for Quantity theory of money is MV = PT Here, M = Total amount of money…

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Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter13: Monetary Policy

Section: Chapter Questions

Problem 6E

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Velocity and the quantity equation

Consider a simple economy that produces only pies. The following table contains information on the economy's money supply, velocity of money, price level, and output. For example, in 2017, the money supply was $360, the price of a pie was $9.00, and the economy produced 800 pies.

Fill in the missing values in the following table, selecting the answers closest to the values you calculate.

Year	Quantity of Money	Velocity of Money	Price Level	Quantity of Output
(Dollars)	(Dollars)	(Pies)	(Dollars)
2017	360		9.00	800
2018	378	20		800

The money supply grew at a rate of from 2017 to 2018. Since pie output did not change from 2017 to 2018 and the velocity of money , the change in the money supply was reflected in changes in the price level. The inflation rate from 2017 to 2018 was .

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