Illustrate what is the price level

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Reference no: EM13108599

Q. Assume that this year's money supply is $50 billion, nominal GDP is $1 trillion and real GDP is $500 billion.

a. Illustrate what is the price level? Illustrate what is the velocity of money?

b. Assume that velocity is constant and the economy's output of goods and services rises by 5 percent each year. Illustrate what will happen to nominal GDP and the price level next year if the bank of Canada keeps the money supply constant?

c. Illustrate what money supply should the Bank of Canada set next year if it wants to keep the price level stable?

d. Illustrate what money supply should the Bank of Canada set next year if it wants inflation of 10 percent?

Reference no: EM13108599

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