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

Assignment Help
Expertsmind Rated 4.9 / 5 based on 47215 reviews.
Review Site
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
Assume that the Fed decided engages in an open market purchase of $100 million dollars. If the required reserve ratio is 10%, and if banks hold an additional 2% of their asset
Every worker sees a Social Security (FICA) tax taken out of his or her paycheck. The nominal tax rate on workers is 7.65 percent. But there's a catch: only wages below a legis
Let's work on an example of calculating Marginal Costs. The book describes Marginal Costs as the additional cost incurred when the output is increased by one unit. However, so
Assume that only one health condition ever afflicts people for which one treatment is available, costing $100,000. The condition is very bad, so all consumers would be willing
An independent trucker has to choose one of the four possible combinations of inputs listed below. The two inputs are drivers and machinery. If he buys expensive machinery, th
Suppose that U.S. prices rise 4% over the next year while prices in Mexico rise 6%. According to the purchasing power parity theory of exchange rates, what should happen to th
A Wartburg engineering student graduates with student loans in the amount of $41400 that have a repayment APR of 7.66%. How much will the annual payments be if they intend to
Suppose the government sets a controlled price below the market clearing price for a commodity. Draw a diagram and use the idea of a maximum buying price to explain whether th