By how much would v have to fall to offset the increase

Reference no: EM13208727

Suppose that an economy is characterized by:

M= $ 2 trillion
V= 2.5
P= 1.0

A) What is the real value of output (Q)? Now assume that the Fed increase the money supply by 10 percent and velocity unchanged.

B) If the price level remains constant, by how much will real output increase?

C) If ,instead, real output is fixed at the natural level of unemployment,by how much will the prices rise?

D) By how much would V have to fall to offset the increase in M?

Reference no: EM13208727

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