ECONOMICS:PRIN.+POLICY-MINDTAP (1 TERM)
14th Edition
ISBN: 9781337912396
Author: Baumol
Publisher: CENGAGE L
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Chapter 31, Problem 2TY
To determine
Calculate the velocity of money.
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Suppose the money supply M has been growing at 19% per year and nominal GDP, PY, has been growing at 77% per
year. The data are as follows (in billions of dollars).
M
PY
V
2021
400
4000
2022
476
7080
2023
566.44
12,532
Calculate the velocity V in each year. (Fill in the table above, rounding to one decimal place.)
Velocity is growing at an approximate rate of % per year. (Round to the nearest whole number.)
Please type the answer by computer, so that I can see it clearly.
Suppose the current money supply (M) is 4.8 billion U.S. dollars, the nominal gross domestic product (GDP) is 72 billion U.S. dollars, and the actual gross domestic product (Y) is 12 billion U.S. dollars. Calculate the price level (P) and the velocity of money (V) separately. Show your steps.
Suppose an economy has a price index at 19, real GDP of $11.83 trillion, and a money supply (M2) of $21.79 trillion. What is the M2 velocity of money for this economy? Round this to two digits after the decimal.
Chapter 31 Solutions
ECONOMICS:PRIN.+POLICY-MINDTAP (1 TERM)
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- (b) Assume that a country’s nominal GDP was measured at $1500 billion in a year and the volume of money (i.e. M1) circulating in the economy the same year was $400 billion. Using the equation of exchange, determine the velocity of money during the year.arrow_forwardIf the money supply increases by 7%, the price level by 2%, and the real output by 6%, then according to the equation of the quantitative theory of money, the velocity of money increases by:arrow_forwardSuppose the velocity of money decreased from 1.5 to 1.3. Velocity of M2 2.0 1.9 1.8 1.7 1.6 1.5 1960 Recession % Average 1965 1970 1975 1980 Ratio of GDP to M2 1985 M 1990 YEAR 1995 By what percent would M have to increase in order to fully offset this decrease in V? Instructions: Enter your response as a percentage rounded to one decimal place. 2000 2005 2010 2015 2020arrow_forward
- Do not type in dollar signs or round any of your answers. In year one, the money supply (M) is equal to 500, the velocity of money (V) is 5, and the price level is 1.0. According to the equation of exchange, in year 1, nominal and real GDP are both equal to In year 2, the money supply is increased to 530.4 and velocity is unchanged. If the economy grew at the rate of 4 percent, real GDP in year 2 is equal to while nominal GDP in year 2 is equal to As a result of the Fed's decision to increase the money supply from 500 to 530.4, the price level rose from 1.0 to indicating that the inflation rate was percent.arrow_forwardAssume GDP is currently $10,850 billion per year and the quantity of money is $833 billion. What is the velocity of money?arrow_forwardThe equation for the velocity of money is defined as: MV=PR MV=PT MV=MV MV=PY None of the above.arrow_forward
- Assume that a country's money velocity remains constant and that the rate of money growth is 4%. A) What is the rate of spending growth? B) If money growth increases by 1.5 percentage points and consumption growth increases by 0.5 percentage points, what is the new rate of spending growth? C) Given your answer in Part B, what is the long-run rate of real GDP growth at an inflation rate of 4%?arrow_forwardSuppose that you know the following information about the economy. The rate of change of the velocity of circulation is 0.5 percent per annum. Real GDP is growing by 1.0 percent per annum. What is the annual rate of inflation if the money supply is growing by 3.4 percent per annum? (Enter the numerical value only)arrow_forwardVelocity 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 Nominal GDP (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 .arrow_forward
- If the money supply is growing at a rate of 6 percent per year, real GDP (real output) is growing at a rate of 2 percent per year, and velocity is constant, what will the inflation rate be? %. (Enter your response as an integer value.)arrow_forward21arrow_forwardSuppose the velocity of circulation (V) is constant. The annual growth rate of real GDP is 3%. The money supply grows by 5% per year. Suppose the nominal interest rate is 1%, how much is the real interest rate?arrow_forward
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