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ECON MACRO 5th Edition by William McEachern
Edition 5ISBN: 978-1305659094ECON MACRO 5th Edition by William McEachern
Edition 5ISBN: 978-1305659094 Exercise 6
QUANTITY THEORY OF MONEY What basic assumption about the velocity of money transforms the equation of exchange into the quantity theory of money? Also:
a. According to the quantity theory, what will happen to nominal GDP if the money supply increases by 5 percent and velocity does not change?
b. What will happen to nominal GDP if, instead, the money supply decreases by 8 percent and velocity does not change?
c. What will happen to nominal GDP if, instead, the money supply increases by 5 percent and velocity decreases by 5 percent?
d. What happens to the price level in the short run in each of these three situations?
a. According to the quantity theory, what will happen to nominal GDP if the money supply increases by 5 percent and velocity does not change?
b. What will happen to nominal GDP if, instead, the money supply decreases by 8 percent and velocity does not change?
c. What will happen to nominal GDP if, instead, the money supply increases by 5 percent and velocity decreases by 5 percent?
d. What happens to the price level in the short run in each of these three situations?
Explanation
Verified
Verified
Equation of Exchange
Equation of exchan...
ECON MACRO 5th Edition by William McEachern
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