Elucidate what money supply should the fed set
Course:- Business Economics
Reference No.:- EM1349686

Assignment Help
Assignment Help >> Business Economics

Suppose that in year 2008, the money supply is $400 billion, nominal GDP is 9 trillion, and real GDP is $4 trillion.

(a) What is the price level? What is the velocity of money?

(b) Suppose the velocity is constant and the economy's output of goods and services rises by 5 percent each year. What will happen to nominal GDP and the price level next year if the Fed keeps the money supply constant?

(c) Elucidate what money supply should the Fed set in year 2009 if it wants to keep the price level stable?

Put your comment

Ask Question & Get Answers from Experts
Browse some more (Business Economics) Materials
Illustrate and briefly explain the adjustment process of Aggregate Supply and Demand following the introduction of successful Supply Side policies that significantly increases
The Wall Street Journal's experience after it increased its cost to 75 cents. Illustrate what implicit assumptions are the publishers also the analysis making about cost ela
Identify a personal economic decision that was driven by a behavioral bias rather than by pure rational behavior. Given your understanding of behavioral economics, how would y
In the labor market, what causes a movement along the demand curve? What causes a shift in the demand curve? In 1980, Denmark had a GDP of $70 billion (measured in U.S. dollar
Consider both sides of the argument and come to a decision of whether to close the plant or continue to operate it. How would you explain to either the president or the CEO th
Bayer Schering Pharma AG, Germany owns the Alka-Seltzer, which was launched in 1931 and was meant for relief of minor aches, pains, inflammation, fever, headache, heartburn, s
Suppose Congress and the president decide that the best method to stimulate the economy is to cut taxes. The total amount of tax cuts approved is $300 billion and the current
A monopolist faces the inverse demand curve: p(Q)=100-4q and a cost structure of: C(q)=q^(2) + 10q What is the profit maximizing amount of output for the firm and how much pro