Money supply change as a result of this single transaction

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1. Suppose the price level and the value of the dollar in Year 1 are 1.0 and $1.00, respectively.

a. If the price level rises to 1.50 in year 2, what is the new value of the dollar?

b. If instead the price level had fallen to 0.75, what would have been the value of the dollar?

 

2. Assume that John Nash has $10,000 in his checking account and uses his checking account card to withdraw $150 of cash from the bank’s automated teller machine. By what dollar amount did the M1+ money supply change as a result of this single transaction? Explain.

Reference no: EM131091276

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