The quantity equation states that the money supply divided by the velocity of money equals the price level divided by real output. money supply times the velocity of money equals the price level times real output. money supply times the price level equals real output divided by the velocity of money. money supply times the price level equals real output times the velocity of
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- All else constant, if the GDP in an economy decreases then: demand for money increases. demand for money decreases. the quantity demanded for money increases. the quantity demanded for money decreases.According to the quantity theory of money, an excess quantity of money supplied will lead to: OPTIONS: a higher price level. a reduced level of real Gross Domestic Product (GDP). a reduction in spending and higher interest rates. a higher level of employment.Which of these assumptions does the Quantity Theory of Money depends on? Velocity of money is stable and GDP is at full employment. Real GDP depends upon the supply of resources and full employment is achieved. Real GDP depends upon the supply of resources and velocity of money is stable. There is government budget balance and trade balance in net exports.
- There are several factors that influence money demand. Explain the effects of the following influences on money demand: A decrease in income. An increase in interest rates. An increase in inflation. A decrease in credit availability.An increase in nominal GDP will Multiple Choice increase the transactions demand and the total demand for money. decrease the transactions demand and the total demand for money. increase the transactions demand for money but decrease the total demand for money. decrease the transactions demand for money but increase the total demand for money.An increase in the aggregate price level: A) increases the demand for money. B) shifts the demand for money to the left. C) does not affect the demand for money. D) decreases the demand for money.
- Money supply, money demand, and adjustment to monetary equilibrium The following table shows a money demand schedule, which is the quantity of money demanded at various price levels (P) Fill in the Value of Money column in the following table. Price Level (P) Value of Money (1/P) Quantity of Money Demanded (Billions of dollars) 1.00 0.50 / 1.00/2.00 1.5 1.33 0.67 / 0.75 / 1.33 / 2.66 2.0 2.00 0.50 / 1.00/2.00/4.00 3.5 4.00 0.25 / 2.00/4.00/8.00 7.0 Now consider the relationship between the price level and the quantity of money that people demand. The lower the price level, the ___More/Less___money the typical transaction requires, and the___More/Less___money people will wish to hold in the form of currency or demand deposits. According to your graph, the equilibrium value of money is__0.25 / 0.50 /0.75 /1.00__ , therefore the equilibrium price level is __1.00 / 1.33 / 2.00 / 4.00__ . Now, suppose that the Fed increases…Consider a simple economy that produces only pies. The following table contains information on the economy's money supply, velocity of money, price level, and output. For example, in 2018, the money supply was $360, the price of a pie was $4.50, and the economy produced 800 pies. Fill in the missing values in the following table, selecting the answers closest to the values you calculate. Quantity of Money (Dollars) Price Level (Dollars) Quantity of Output (Pies) Nominal GDP (Dollars) 360 4.50 800 378 800 Year 2018 2019 Velocity of Money The money supply grew at a rate of 2019 was 10 from 2018 to 2019. Since pie output did not change from 2018 to 2019 and the velocity of money the change in the money supply was reflected ▼in changes in the price level. The inflation rate from 2018 toWhich of the following statements is true of the money supply? a) Increasing the money supply is a way of warding off an economic downturn. b) Decreasing the money supply is a way of warding off an economic downturn. c) The money supply is increased by lowering spending. d) The money supply is increased by raising taxes.
- It is not possible for the total value of production to increase unless the money supply also increases. After all, how can the value of the goods and services being bought and sold increase unless there is more money available.explain the assertion using the equation M = money supply, V = velocity of money, P = price level, Y = real GDP.The following table gives the quantity of money demanded at various price levels (P), the money demand schedule. In the following table, fill in the column labeled Value of Money. Price Level (P) Value of Money (1/P) 0.80 1.00 1.33 2.00 Now consider the relationship between the quantity of money that people demand and the price level. The lower the price level, the required to complete transactions, and the money people will want to hold in the form of currency or demand deposits. VALUE OF MONEY Assume that the Federal Reserve initially fixes the quantity of money supplied at $4 billion. Use the orange line (square symbol) to plot the initial money supply (MS1) set by the Fed. Then, referring to the previous table, use the blue connected points (circle symbol) to graph the money demand curve. 2.00 1.75 1.50 1.25 1.00 0.75 0.50 0 0.25 Quantity of Money Demanded (Billions of dollars) 2.0 2.5 4.0 8.0 0 1 2 3 5 6 QUANTITY OF MONEY (Billions of dollars) 7 According to your graph, the…In the long run, technological progress and increases in the money supply both make the price level rise. and increases in the money supply both make the price level fall. makes the price level rise, while increases in the money supply make prices fall. makes the price level fall, while increases in the money supply make prices rise.
