Question
In: Economics
Your dormitory, Griffingate, has appointed you central banker of its economy, which deals in the currency...
Your dormitory, Griffingate, has appointed you central banker of
its economy, which deals in the currency of wizcoins. Assume that
the velocity of wizcoins in Griffingate is constant at 10,000
transactions per year. Right now, real GDP is 1,000 wizcoins, and
there are 2,000 wizcoins in existence.
a. What will be the value of each of the variables that make up the
quantity equation?
Instructions: Enter your
answers as whole numbers.
|
|
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b. Now indicate how the other variables will respond to each of
the following scenarios, taking each case separately and assuming
that velocity remains constant.
Instructions: Enter your
answers as whole numbers.
(i) You increase the money supply to 4,000
and prices increase twofold.
|
(ii) Start with the initial values. Real GDP drops to 500
wizcoins and the money supply remains constant.
|
(iii) Start with the
initial values. Prices increase threefold because of a sudden
scarcity of soda, and you decide to keep the supply of wizcoins
constant.
|
(iv) Start with the initial values. You
increase the money supply to 5,000 wizcoins and prices rise by 350
percent.
|
Solutions
Rahul Sunny answered 2 years agoRelated Solutions
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