Suppose that the money supply and real GDP in 2006 were $80 billion and $220 billion,respectively.In 2007,the central bank increased money supply to $88 billion and real GDP rose to $231 billion.Assume the income elasticity of money is 0.5.
a.What are the rates of growth in money supply and real GDP?
b.What is the inflation rate?
c.If,in 2008,the money supply level remains the same level as 2007,but real GDP grows at another 5 percent,what will be the inflation rate in 2008?

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The Answer of Suppose that the money supply and real GDP in 2006 were $80 billion and $220 billion,respectively.In 2007,the central bank increased money supply to $88 billion and real GDP rose to $231 billion.Assume the income elasticity of money is 0.5.
a.What are the rates of growth in money supply and real GDP?
b.What is the inflation rate?
c.If,in 2008,the money supply level remains the same level as 2007,but real GDP grows at another 5 percent,what will be the inflation rate in 2008?

Suppose That the Money Supply and Real GDP in 2006