What would inflation rate be if money supply was decreased

Reference no: EM13221559

Use the quantity theory of money equation for this problem. Suppose the money supply is $550 billion, nominal output is 9 trillion, and real output is 5 trillion. What is the velocity? If the velocity is fixed, what would the inflation rate be if the money supply was decreased $530 billion? Is your answer consistent with the classical dichotomy? Explain. Suppose that when the money supply changed from $550 billion to $530 billion, real output falls by 2%. Now what will happen to inflation rate?

Reference no: EM13221559

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