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Use the quantity equation of money. Suppose the velocity of money is constant at V=5, the price level is P=2 (i.e.. CPI = 200), and the real GDP is $2,000.
What is the quantity of money?
If the real GDP grows by 3% and the Federal Reserve want to keep the price level constant, should the Fed open market committee buy or sell bonds?
How much money should the Fed increase the quantity of money?
If the real GDP grows by 3% and the Fed increases the quantity of money by 48, how much would nominal GDP increase?
What is the approximate inflation rate?
This document contains various important questions and their appropriate answers in the subject field of Economics.
Economics is the study of the principles governing the allocation of scarce means among competing ends when the objective of the allocation is to maximize the attainment of the ends.
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