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ECON 1BB3 Chapter Notes -Demand For Money, Money Supply, Savings Account

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crimsonsheep933
20 Sep 2012
School
McMaster University
Department
Economics
Course
ECON 1BB3
Professor
Bridget O' Shaughnessy

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ECON 1BB3 Full Course Notes
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Chapter 11 homework answers: a. p = 2. Since the left hand side must equal the right hand side, nominal gdp (p*y) will not change. If v is constant and y is growing at 5% per year, then in order to keep p constant, the fed should increase m by 5%. If v is constant and y is growing at 5% per year, then in order to have an increase in p equal to 10%, the fed should increase m by 15%. Money demand will decrease: the price level will rise as (1/p) falls. M: if the bank of canada decreases the money supply, the price level will remain constant. If velocity is constant and the bank of canada wants the inflation. Vm rate to be zero, then the money supply must grow at the same rate as real gdp.

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Related Questions

If the economy's real output is growing by 2.5 percent a year, then in order to maintain price stability, a monetarist would most likely recommend that the money supply should be:

A) held constant

B) decreased by 1 percent a year

C) increased by 2.5 percent a year

D) increased by 7.5 percent a year

Suppose this year's money supply is 400billion, nominal GDP is 12 trillion,and real GDP is 6 trillion. Suppose the veliocity of money is constant and economy's output of goods and services (real GDP) rises by 4% each year. What will happen to nominal GDP and the price level when Fed keeps the money supply constant?

a. what is the price level?

b.what is the veliocity of money

c.what will happen to nominal GDP and the price level if Fed keeps the money supply constant?

d.what wil happen to nominal GDP and the price level if the Fed increases money supply from 400 to 500 billions?

e.what money supply should Fed set next year if wants to keep up price level constant?F

f. what money supply should Fed set next yearif it want inflation of 8%?

PLease make sure you answer c,d,e,f, to get full points!!!!

Velocity remains constant at 8 and the money supply increases from $200 billion to $300 billion.

The original, nominal GDP was $ __ trillion? (Round your response to two decimal places)

The new, nominal GDP is $ __ trillion? (Round your response to two decimal places)

If real GDP increased by 10%, then the price level increased by __ %? (Use the theory of inflation to solve this question.)