Question

Suppose that the Price level = 120, Supply of Money = $20 billion, and Real GDP = $4 billion. If the velocity of money stays the same but Real GDP increases by 20%, what will happen to the price level if the supply of money increases by $10 billion?

Select one:

a. It will increase to 125

b. It will increase to 132

c. It will increase to 144

d. It will increase to 150

e. It will increase to 155

2.

Which of the following is an example of a pro-cyclical government policy?

Select one:

a. The President providing tax credit for first time homebuyer during a financial crisis

b. The President raising spending on education during a recession

c. The Fed raising the Required Reserve Ratio during a recession

d. The Fed raising the Federal Funds Rate during an expansion .

e. Congress raising corporate taxes during an expansion

Answer #1

1. Quantity theory of money : MV=PY

M : Money supply

V: Velocity

P: Price level

Y : Real GDP

By putting the gives values , we get the velocity

($20 billion) V = (120)($4 billion)

V = (480 billion/ 20 billion)

**V = 24 (Velocity of money)**

Now , it is mentioned that Y increases by 20% . So, Y = (4) + (4)(20%) = $ 4.8 billion

And M increases by $10 billion , so M= $(20+10) billion = $30 billion

And V stays the same at 24

So, by putting these values into the equation MV=PY ,we get :

($30 billion)(24)= P ($4.8 billion)

**P= $150**

Hence**,option(D) is correct i.e Price level will increase
to 150.**

2. An example of pro-cyclical government policy is the
**Fed raising the required reserve ratio during a
recession.** Because pro-cyclical government policy which is
going in the same direction of the business cycle.
Hence,**option(C) is correct.**

Suppose that this year’s money supply is $400 billion, nominal
GDP is $10trillion, and real GDP is $4 trillion.
1.What is the price level? What is the velocity of money?
2. Suppose that velocity is constant and the economy’s output of
goods and services rises by4% each year. What will happen to
nominal GDP and the price level next year if the Fed keeps the
money supply constant?
3.What money supply should he Fed set next year if it wants...

Suppose that initially the money supply is $1 trillion, the
price level equals 3, the real GDP is $5 trillion in base-year
dollars, and income velocity of money is 15. Then the money supply
increases by $100 billion, while real GDP and income velocity of
money remain unchanged. a. According to the quantity theory of
money and prices LOADING..., calculate the new price level after
the increase in money supply: nothing.

Suppose that this year's money supply is $500 billion, nominal
GDP is $10 trillion, and real GDP is $5 trillion.
The price level is ______, and the velocity of money is
______.
.
Suppose that velocity is constant and the economy's output of
goods and services rises by 4 percent each year. Use this
information to answer the questions that follow.
If the Fed keeps the money supply constant, the price level will
_______ (rise by 4%, stay the same,...

Suppose that this year's money supply is $500 billion, nominal
GDP is $10 trillion, and real GDP is $5 trillion.
The price level is _____, and the velocity of money is
_____.
Suppose that velocity is constant and the economy's output of
goods and services rises by 3 percent each year. Use this
information to answer the questions that follow.
If the Fed keeps the money supply constant, the price level will
(stay the same, rise by 3%, or fall...

1. Problems and Applications Q1
Suppose that this year's money supply is $400 billion, nominal
GDP is $12 trillion, and real GDP is $4 trillion.
The price level is
, and the velocity of money is
.
Suppose that velocity is constant and the economy's output of
goods and services rises by 3 percent each year. Use this
information to answer the questions that follow.
If the Fed keeps the money supply constant, the price level will
, and nominal...

ECO - 252 Macroeconomics
7. Real output = $800 billion
Nominal output = $2,400 billion
The money supply = $200 billion
The reserve ratio = 10%
a. Find the velocity
of money (V) and the price level (P) consistent with the quantity
equation.
b. Assume that banks
loan out all excess reserves, people hold no currency, V is
constant and real output stays at $800 billion, but the Fed buys
$20 billion worth of government bonds from the public.
What...

1.The money supply in Freedonia is $800 billion. Nominal
GDP is $200billion and real GDP is $300 billion. What are the price
level and velocity in Freedonia?
2.The aggregate production function demonstrates the
fact that the marginal product of labor increases at a(n) what
rate?
3. In the Four-Graph macroeconomic long-run model (labor
market, aggregate production function, the diagonal line to shift
Y, and AD-AS), what does it say about output and
employment?
4. Suppose the economy has only two...

1) Good money functions as a
a. means of exchange, unit of account, and store of value.
b. valuable commodity like gold, silver, gem diamond, and so
on.
c. fiat, even if some may not accept it as a medium of settling
debt.
d. All the above answers are correct.
2) Which policy tool does the Fed often use to change the
quantity of money in the economy?
a. Open market operations.
b. The discount rate.
c. The required reserve...

Suppose the reserve requirement is initially set at 10%.
Instructions: In parts a, b, and d, enter your
answers as a whole number. In part c, round your answer to two
decimal places.
a. At a reserve requirement of 10%, what is the value of the
money multiplier?
b. If the reserve requirement is 10% and the Fed increases
reserves by $20 billion, what is the total increase in the money
supply?
$ billion
c. Suppose the Fed raises the...

(1)
If the spending
multiplier equals 10 and the actual equilibrium real GDP is $4
billion below potential real GDP, then other things being equal,
_____ to reach the potential real GDP level.
Group of answer choices
autonomous spending
needs to increase by $40 billion
real GDP needs to
increase by $40 billion
autonomous spending
needs to increase by $4 billion
real GDP needs to
increase by $0.4 billion
autonomous spending
needs to increase by $0.4 billion
(2)
Other things...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 40 seconds ago

asked 8 minutes ago

asked 8 minutes ago

asked 8 minutes ago

asked 27 minutes ago

asked 36 minutes ago

asked 38 minutes ago

asked 51 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago