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Brief Principles of Macroeconomics...

8th Edition
N. Gregory Mankiw
ISBN: 9781337091985

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BuyFindarrow_forward

Brief Principles of Macroeconomics...

8th Edition
N. Gregory Mankiw
ISBN: 9781337091985
Textbook Problem

If nominal GDP is $400, real GDP is $200, and the money supply is $100, then

a. the price level is ½, and velocity is 2.

b. the price level is ½, and velocity is 4.

c. the price level is 2, and velocity is 2.

d. the price level is 2, and velocity is 4.

To determine

Price level and velocity.

Explanation

Option (d):

The velocity is calculated as follows:

Velocity = Nominal GDPMoney supply=400100=4

Velocity is 4.

The price level is calculated as follows:

Price level = Velocity× Money supplyReal GDP =4

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