What is the price level and what is the velocity of money

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Reference no: EM13238667

Suppose that this year's money supply is $500 billion, nominal GDP is 10 trillion and real GDP is $5 trillion.

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

b) Suppose that velocity is constant and the economy's output of good and services rised by 5% each year, what will happen to nominal GPD and the price level next year if the Fed keeps the money supply constant?

c) what money supply should the Fed set next year if it wants to keep the price level constant?

d)What money supply should the fed set next year if it wants inflation of 10%?

Reference no: EM13238667

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